Exam 6: Break-Even and Cost-Volume-Profit Analysis

Victor plans to set up an on-line business selling software applications that he develops and supports. He believes that a price of $130 for his product including the technical support would be competitive. His monthly fixed expenses amount to $850. Victor would hire some college students to provide the technical support of the application paying them for 3 hours at $15 per hour for each client. a) How many clients does Victor need to acquire to break even? b) If he wants to achieve a target profit of $500 monthly, how many clients does he need?

A company that makes audio computer input devices has calculated their revenue and costs as follows for the most recent fiscal period: Sales $723 000 Costs: Fixed Costs $345 000 Variable Costs 404 880 Total Costs 749 880 Net Income (Loss) $(26 880) The company has a target level of profitability of $35,000 per fiscal period. What sales dollar volume do they have to achieve in order to achieve their goal?

The operating budget of the Omega Twelve Company contains the following information. Sales at 92% of capacity $644 000 Fixed costs $215 000 Variable costs 373 520 588 520 Net income $55 480 a) Draw a detailed break-even chart. b) Compute the break-even point as a percent of capacity. c) Determine the break-even point in dollars if fixed costs are reduced by $11 200 while variable costs are changed to 62% of sales.

Elaine's business budget included sales of $350 000 and fixed costs of $52 600. If the total contribution margin for the business was $125 000, what are the sales needed to break even?