# For the current year ending March 31

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```					21-11. For the current year ending March 31,Jwork Company expects fixed costs of
\$440,000, a unit variable cost of \$50,and a unit selling price of \$75. a. Compute the
anticipated break-even sales (units). b. Compute the sales (units) required to realize
income from operations of \$90,000.
Fixed Costs
a. Break-Even Sales (units) =
Unit Contributi on Margin

\$440,000
Break-Even Sales (units) =             = 17,600 units
\$75 \$50

Fixed Costs + Target Profit
b.   Sales (units) =
Unit Contributi on Margin

\$440,000 + \$90,000
Sales (units) =                      = 21,200 units
\$75 \$50

21-13. Currently, the unit selling price of a product is \$280,the unit variable cost is
\$230,and the total fixed costs are \$525,000.A proposal is being evaluated to increase the
unit selling price to \$300. a. Compute the current break-even sales (units). b. Compute
the anticipated break-even sales (units), assuming that the unit selling price is increased
and all costs remain constant.

Fixed Costs
a.   Break-Even Sales (units) =
Unit Contributi on Margin

\$525,000
Break-Even Sales (units) =                 = 10,500 units
\$280    \$230

Fixed Costs
b.   Break-Even Sales (units) =
Unit Contributi on Margin

\$525,000
Break-Even Sales (units) =                 = 7,500 units
\$300    \$230

21-16. Sprint Nextelis one of the largest digital wireless service providers in the United
States. In a recent year, it had approximately 41.5 million direct subscribers (accounts)
that generated revenue of \$40,146 million.Costs and expenses for the year were as
follows (in millions): Cost of revenue \$17,191 Selling, general, and administrative
expenses 12,673 Depreciation 5,711 Assume that 75% of the cost of revenue and 35% of
the selling, general, and adminis- trative expenses are variable to the number of direct
subscribers (accounts). a. What is Sprint Nextel’s break-even number of accounts,using
the data and assump- tions above? Round units to one decimal place (in millions). b. How
much revenue per account would be sufficient for Sprint Nextel to break even if the
number of accounts remained constant?

Fixed Cost
a.   Break-Even =
Revenue per Account Variable Cost per Account

\$18,246.3 3
Break-Even =
\$967 1 \$418 2
Break-Even = 33.2 million (rounded) accounts
1
Revenue per account (in millions):
\$40,146/41.5 = \$967 (rounded)
2
Variable cost per account (in millions):
Cost of revenue ...................................................      \$17,191 × 75% = \$ 12,893.3
expenses ..........................................................     12,673 × 35%        4,435.6
Total variable cost ..............................................                         \$ 17,328.9
Divided by number of accounts ........................                                     ÷     41.5
Variable cost per account (rounded) ................                                       \$      418
3
Fixed costs (in millions):
Cost of revenue ...................................................      \$17,191 ×   25%   \$   4,297.8
expenses ..........................................................    12,673 × 65%        8,237.5
Depreciation........................................................       5,711 × 100%       5,711.0
Total fixed costs ..................................................                       \$ 18,246.3
Fixed Cost
b.   Break-Even =
Revenue per Account Variable Cost per Account

\$18,246.3
41.5 accounts =
X \$418
41.5X – \$17,347 = \$18,246.3
41.5X = \$35,593.3
X = \$858 (rounded)

```
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