Lawrence Washington

BPS 410

Mr. Taylor

January 24, 2015

Electronic Portfolio Project

I. Calculation of annual Break Even Point in units

Selling Price = $100.00 Variable Cost per Unit = $76.00 Total Fixed Cost =$360,000

X = Units

Selling Price – Variable Cost – Total Fixed Cost = Income

100.00x – 76x – 360,000 = 0

100x- 76x +360,000 = + 360,000

24x = 360,000

24x / 24 360,000 / 24

x = 15,000 Units

II. Prepared Income Statement

Sales 15,000 Units x $100 $1,500,000

Variable Cost

15,000 Units x $76 -$1,140,000

Fixed Cost - $360,000

Income = 0

III. Calculations of units required to be sold to meet company’s profit goal of $120,000 before taxes.

Selling Price = $100.00 Variable Cost per Unit = $76.00 Total Fixed Cost =$360,000

100x – 76x – 360,000 = 120,000

24x 480,000

24x = 480,000

24x / 24 480,000 / 24

x = 20,000

IV. Calculated operating income loss if company sells 22,000 units.

Sales 22,000 Units x $100 $2,200,000

Variable Cost

22,000 Units x $76 -$1,672,000

Fixed Cost - $360,000

Income = $168,000

V. What impact does a change in variable costs have on the breakeven point?

When a company’s variable cost rises additional units must be sold to recover its costs

and break even. When variable costs go down the company is not required to units at

the same volume in order to reach the breakeven point.

VI. What impact does a change in fixed costs have on the breakeven point

When a companies fixed costs drop the breakeven point drops as well. This is the result

of needing to sell fewer units to recover the company’s fixed costs. When fixed costs

begin to rise the breakeven point rises to meet the company’s need to recover operating

costs.