- Submitted by: torreydiller
- Views: 406
- Category: Other
- Date Submitted: 09/25/2011 02:19 PM
- Pages: 2
What are the variable costs? The variable cost is $3.93 cost per unit (one meal) and 13,755 low month.
What is the fixed cost? 6,745
How many meals the program needs to provide for the fiscal year to reach BEP? 43,992
How much profit will the program earn providing 45,000 meals? $1,854.72
Fixed cost take the variable low month cost (13,735) and subtract it from the total cost for the low month (20,500) equaling 6,745 for the fixed cost.
Breakeven Point uses the formula Px=A+Bx.
Putting $5.77 service price in for P the fixed cost of 6,745 in for A, and the variable cost of the meal $3.93 in for B. In that, x is the amount of service to be provided, which we are solving for. Now, subtract both sides with 3.93x and the new equation will be 1.84x=6,745 now we will divide 6,745 by 1.84 and the answer will be x=3,666. This answer represents the meals to be served for a month, however multiply that number by 12 to find the fiscal year. In the fiscal year 43,992 meals will need to be served in order to meet the BEP.
The new BEP is 961 newsletters. The new BEP is not feasible because the coordinator and the part-time assistant believe they can handle up to 650 newsletters; however just too breakeven they would have to meet 961. I believe there would be slack capacity because the numbers do not match and the fixed cost and the current variable are too high to meet the BEP. If the company only does 650 newsletters and the BEP are 961 the slack capacity will be $1,399.50 until they can produce more newsletters. One person getting person getting paid 5,000 was able to provide 525 but now they are higher two more people at the cost of 9,900 fixed cost and they are only able to provide 125 more newsletters than the one person before.