How do I calculate the breakeven revenue if I do not know how many units make up total revenue?
I am provided with Revenues, variable costs, fixed costs, and operating income and need to calculate the breakeven revenue. However, I do not know how to figure out the # units sold in order to do so. The picture of my hw question is attached for further clarity. Only parts 1 and 2 (though I can figure out 2 if I can solve 1)..
ASSIGNMENT MATERIAL 105
3-51 Sales mix, two products. The Stackpole Company retails two products: a standard and a deluxe
version of a luggage carrier. The budgeted income statement for next period is as follows:
Deluxe Carrier
62,500
Total
250,000
Units sold
Revenues at $28 and $50 per unit
Variable costs at $18 and $30 per unit
Contribution margins at $10 and $20 per unit
Fixed costs
Operating income
Standard Carrier
187,500
$5,250,000
3,375,000
$1,875,000
$3,125,000
1,875,000
$1,250,000
$8,375,000
5,250,000
3,125,000
2,250,000
$ 875,000
Required
1. Compute the breakeven point in units, assuming that the company achieves its planned sales mix.
2. Compute the breakeven point in units (a) if only standard carriers are sold and (b) if only deluxe carriers
are sold.
3. Suppose 250,000 units are sold but only 50,000 of them are deluxe. Compute the operating income.
Compute the breakeven point in units. Compare your answer with the answer to requirement 1. What
is the major lesson of this problem?
3-52 Gross margin and contribution margin. The Museum of America is preparing for its annual appre-
ciation dinner for contributing members. Last year, 525 members attended the dinner. Tickets for the dinner
were $24 per attendee. The profit report for last year’s dinner follows.
SES
$12,600
15,300
Ticket sales
Cost of dinner
?
Gross margin
Invitations and paperwork
Profit (loss)
(2,700)
SI ERESSE
2,500
$ (5,200)
Required
This year the dinner committee does not want to lose money on the dinner. To help achieve its goal, the com-
mittee analyzed last year’s costs. Of the $15,300 cost of the dinner, $9,000 were fixed costs and $6,300 were
variable costs. Of the $2,500 cost of invitations and paperwork, $1,975 were fixed and $525 were variable.
1. Prepare last year’s profit report using the contribution margin format.
2. The committee is considering expanding this year’s dinner invitation list to include volunteer members
(in addition to contributing members). If the committee expands the dinner invitation list, it expects at-
tendance to double. Calculate the effect this will have on the profitability of the dinner assuming fixed
costs will be the same as last year.
3-53 Ethics, CVP analysis. Megaphone Corporation produces a molded plastic casing, M&M101, for
many cell phones currently on the market. Summary data from its 2017 income statement are as follows:
Revenues
$5,000,000
Variable costs
3,250,000 2,750,000
Fixed costs
1,890,000
Operating income
$ 140,000)
Joshua Kirby, Megaphone’s president, is very concerned about Megaphone Corporation’s poor profitabil-
ity. He asks Leroy Gibbs, production manager, and Tony DiNunzo, controller, to see if there are ways to
reduce costs.
After 2 weeks, Leroy returns with a proposal to reduce variable costs to 55% of revenues by reducing
the costs Megaphone currently incurs for safe disposal of wasted plastic. Tony is concerned that this would
expose
the
company to potential environmental liabilities. He tells Leroy, “We would need to estimate some
of these potential environmental costs and include them in our analysis.” “You can’t do that,” Leroy replies.
“We are not violating any laws. There is some possibility that we may have to incur environmental costs
in the future, but if we bring it up now, this proposal will not go through because our senior management
always assumes these costs to be larger than they turn out to be. The market is very tough, and we are in
danger of shutting down the company and costing all of us our jobs. The only reason our competitors are
making money is because they are doing exactly what I am proposing.”
1. Calculate Megaphone Corporation’s breakeven revenues for 2017 ned units, unit cost
Required
2. Calculate Megaphone Corporation’s breakeven revenues if variable costs are 55% of revenues. (2,750,000
3. Calculate Megaphone Corporation’s operating income for 2017 if variable costs had been 55% of revenues.360,000
4. Given Leroy Gibbs’s comments, what should Tony Di Nunzo do?

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