ACCT Extra Credit
ACCT Extra Credit
Problem 1
Assume that Tyson Company sells a single product with the following cost and price data:
The relevant range for units sold is from zero units to 60 units.
Instructions
Seprod Manufacturing makes aluminum cans. The following cost and price data apply to the
company’s operations:
Instructions
1) Write the equation for the fixed cost line (curve). Explain what it means.
2) Write the equation for the revenue curve. Explain what it means.
3) Write the equation for the total cost curve. Explain what it means.
4) Write the equation for break-even units and solve.
5) What is the break-even revenue? Show your calculations.
6) Develop a CVP graph. Make sure your break-even on the graph matches your
calculation.
a. In developing your graph, pick some key points. The equations developed above
can help you in this regard.
7) Calculate the desired number of units necessary to achieve a desired profit of $40,000.
8) What is the margin of safety – in other words, by how much can sales decrease before
the company runs into financial trouble? Show calculations.
9) The marketing manager believes that reducing the sales price to $25.00 and increasing
fixed cost by $12,000 to $42,000 will increase profitability. Is he correct?
a. Compute break-even units
b. Compute break-even in sales dollars
c. Construct a CVP graph. Use graph paper or Excel.
Note: Unless your work is neat, it will not be accepted. No late submission will be accepted.