Business, 22.02.2020 04:16 joedawg50

Profit-Volume Chart

For the coming year, Loudermilk Inc. anticipates fixed costs of $600,000, a unit variable cost of $75, and a unit selling price of $125. The maximum sales within the relevant range are $2,500,000.

a. Determine the maximum possible operating loss.
$

b. Compute the maximum possible operating profit.
$

c. Construct a profit-volume chart on paper. Indicate whether each of the following levels of sales is in the operating profit area, operating loss area, or at the break-even point

4,800 units
8,000 units
12,000 units
16,000 units
20,000 units
d. Estimate the break-even sales (units) by using the profit-volume chart constructed in part (c).

Answers: 3

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Answers

Answer from: janeou17xn

Explanation:

Answer a.

Maximum Operating Loss will occur when sale is $0.

If Sale is $0, then Variable Cost will also be $0 and Fixed Cost will be $600,000

Operating Profit = Sales – Variable Expenses – Fixed Cost

Operating Profit = - 600,000

Operating Profit = $ - 600,000

Answer b.

Maximum Operating Loss will occur when sale is $2,500,000.

Units Sold = 20,000 ($2,500,000 / 125)

If Sale is $2,500,000, then Variable Cost will also be $1,500,000 ($75×20,000) and Fixed Cost will be $600,000

Operating Profit = Sales – Variable Expenses – Fixed Cost

Operating Profit = 2,500,000 – 1,500,000 - 600,000

Operating Profit = $ 400,000

Answer c.

4,800 Units :

Operating profit = $125×4,800 - $75×4,800 – 600,000

Operating profit = $ - 360,000

8,000 units :

Operating profit = $125×8,000 - $75×8,000 – 600,000

Operating profit = $ - 200,000

12,000 Units :

Operating profit = $125×12,000 - $75×12,000 – 600,000

Operating profit = $ 0

16,000 Units :

Operating profit = $125×16,000 - $75×16,000 – 600,000

Operating profit = $ 200,000

20,000 Units :

Operating profit = $125×20,000 - $75×20,000 – 600,000

Operating profit = $ 400,000

4,800 Units Operating Loss Area

8,000 Units Operating Loss Area

12,000 Units Break-even Point

16,000 Units Operating Profit Area

20,000 Units Operating Profit Area

Answer d.

Break-even Sales = 12,000 Units as there is neither operating profit nor loss.

Answer from: Quest

The business cycle is the periodic but irregular up-and-down movement in economic activity, measured by fluctuations in real gross domestic product (gdp) and other macroeconomic variables. a business cycle is typically characterized by four phases—recession, recovery, growth, and decline—that repeat themselves over time. economists note, however, that complete business cycles vary in length. the duration of business cycles can be anywhere from about two to twelve years, with most cycles averaging six years in length. some business analysts use the business cycle model and terminology to study and explain fluctuations in business inventory and other individual elements of corporate operations. but the term "business cycle" is still primarily associated with larger (industry-wide, regional, national, or even international) business trends.

Answer from: Quest

3rd the reason why is because of management and leadership

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Profit-Volume Chart

For the coming year, Loudermilk Inc. anticipates fixed costs of $600...

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