Assignment 2
1) The Red Letter bookstore has $85,000 of sales, Variable costs of
$36,550, and fixed costs of $27,360. What would their sales have to be
to break-even?
Hint:
Let X represent the quantity in units.
Assume the unit price is $1.00. The variable cost per unit is then Total variable costs/Total revenue … 2) Janet is planning to make fancy multi-tiered wedding cakes for the
next wedding sales. To make the cakes, she must invest $834 in some
special pans. To get started, she needs to spend $1800 to advertise in
the newspaper. She estimates that supplies and materials for each cake
will $60. She is planning to set the price for each cake at $499.
Perform a break-even analysis showing computations of the
a) contribution margin;
b) contribution rate;
c) break-even point in units;
d) break-even point is sales dollars. 3) A business student wants to set up a business completing tax forms
for other students. The price would be for $50 for each job. Fixed
expenses include $395 for the purchase of tax software. Students would
be hired to complete the forms paying them for two hours at $12 per hour per job. Paper and supplies would cost $5 per job. How many jobs
would have to be generated before a profit was made? 4) The following is information from the accounting records of XXX
Corporation:
Fixed costs per period are $4800. Sales volume for the past period was
$19360 and variable costs were $13552. Capacity per period is a sales
volume of $32000. (11 marks)
a) Compute the contribution margin and contribution rate.
b) Compute the break-even point in sales dollars and as a percent
of capacity.
c) For each of the following independent situations, determine the
break-even point:
- Fixed costs are decreased by $600.
- Fixed costs are increased to $5670 and variable costs are
changed to 55% of sales. 5) Fastprint services operates several franchises, where they print
brochures, business cards and stationary. They plan to sell 80 jobs next
week, at an average cost of $52 each. The weekly expenses are $1840.
a) How much must they charge for each job to break-even?
b) If they wish to make a profit of $1200, what price do they have
to charge? c) If they sell 90 jobs how much profit will they make (use the
price from part b)?
d) If they sell 100 jobs via a promotion, what is the minimum price
they must charge to break-even?

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