The president wanted to know the break-even point for each of the company's products

The president wanted to know the break-even point for each of the company's products. Piedmont Fasteners Corporation makes three different clothing fasteners in its manufacturing facility in North Carolina. Data concerning these products appear below:

VELCRO METAL NYLON
Normal annual sales volume 100,000 200,000 400,000
Unit selling price 1.65 1.50 0.80
Variable cost per unit 1.25 0.70 0.25
*Total fixed expenses are $400,000 per year.

All three products are sold in highly competitive markets, so the company is unable to raise its prices without losing unacceptable numbers of customers. The company has an extremely effective lean production system, so there are no beginning or ending work in process or finished goods inventories.

Required:
1. What is the company’s over-all break-even point in total sales dollars?
2. Of the total fixed costs of $400,000, $20,000 could be avoided if the Velcro product were dropped, $80,000 if the Metal product were dropped, and $60,000 if the Nylon product were dropped. The remaining fixed costs of $240,000 consist of common fixed costs such as administrative salaries and rent on the factory building that could be avoided only by going out of business entirely.
a. What is the break-even point in units for each product?
b. If the company sells exactly the break-even quantity of each product, what will be the overall profit of the company? Explain this result.


Click here for the solution: The president wanted to know the break-even point for each of the company's products

Susan Hiel wanted to open up a hat shop

Susan Hiel wanted to open up a hat shop. She needs to know how many hats must be sold in a year to break even. The stores fixed costs for the year are estimated at $85,000. She is planning on selling the hats for $20.00 a piece. Her cost per hat is $10.50.

a) Find the operating breakeven point in number of hats
b) What is the total operating costs at the breakeven volume found in a.
c) A marketing firm is estimating that she will be able to sell an average of 1,000 hats per month. Should Susan start the business?
d) What will be the EBIT per month if Susan sells 1,000 hats?


Click here for the solution: Susan Hiel wanted to open up a hat shop