Breakeven Analysis | |||||||||||||||

Management believes it can sell a new product for $250. | |||||||||||||||

First Scale of Operations: fixed costs of production are estimated to be $50,000 and the variable costs are $215 a unit | |||||||||||||||

Second Scale of Operations: fixed costs of production are estimated to be at $150,000 and variable costs are $170 a unit | |||||||||||||||

a. Complete the tables below for each scale of operations with the given levels of output and the relationships | |||||||||||||||

between quantity and fixed cost, quantity and variable costs, and quantity and total costs. | |||||||||||||||

First Scale of Operations | |||||||||||||||

Total Revenue | Variable Costs | Fixed Costs | Total Costs | Profit / | |||||||||||

Quantity | (Loss) | ||||||||||||||

0 | |||||||||||||||

500 | |||||||||||||||

1,000 | |||||||||||||||

1,500 | |||||||||||||||

2,000 | |||||||||||||||

2,500 | |||||||||||||||

3,000 | |||||||||||||||

Second Scale of Operations | |||||||||||||||

Total Revenue | Variable Costs | Fixed Costs | Total Costs | Profit / | |||||||||||

Quantity | (Loss) | ||||||||||||||

0 | |||||||||||||||

500 | |||||||||||||||

1,000 | |||||||||||||||

1,500 | |||||||||||||||

2,000 | |||||||||||||||

2,500 | |||||||||||||||

3,000 | |||||||||||||||

b. What is the breakeven number of units sold for each scale of operations? Note that partial units cannot be produced. | |||||||||||||||

c. Assume that ½ of the fixed costs in each scale of operations is non-cash depreciation. What is the cash flow | |||||||||||||||

generated by each scale of operations if 1,000 of units are sold? | |||||||||||||||

d. Based on the results calculated in the tables for each scale of operations and the breakeven units calculations, what effect does the mixture of fixed and | |||||||||||||||

variable costs have on a firm’s operating earnings? |

Interested in a PLAGIARISM-FREE paper based on these particular instructions?...with 100% confidentiality?