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snowmist69 · Jul 29, 2011, 03:21 PM

Techno Designs produces head covers for golf clubs. The company expects to generate a profit next year. It anticipates fixed manufacturing costs of $126,500 and fixed general and administrative expenses of $82,030 for the year. Variable manufacturing and selling costs per set of head covers will be $4.65 and $2.75, respectively. Each set will sell for $13.40.

1) Compute the breakeven point in sales units.
2) Compute the breakeven point in sales dollars.
3) If the selling price is increased to $14.00 per unit and fixed general and administrative expenses are cut by $33,465, what will be the new breakeven point be in units.

Just need to know where to start. I don't know if I'm suppose to add 126,500 and 82,030, for the FC do I add the 4.65 to the 2.75. I have no clue as where to begin I know how the formula works but the example were pretty simple just stated the amounts that were need not four different amounts. Any help to get me started will be apreciated.

Just Looking · Jul 29, 2011, 03:34 PM

You add the fixed costs together and the variable costs per unit together. You could do a simple algebraic calculation using the sales price per unit, the variable costs per unit, and the fixed costs to solve for the number of units.

snowmist69 · Jul 29, 2011, 03:55 PM

Ok so I added 126,500 to 82,030 and get 208,530 for my FC

then 4.65 to 2.75 for 7.40 for VC

So now I'm ready for the formula which is S-VC-FC=$0

So would it be 13.40 - 7.40-208,530=$0

this would come out as a -208,524 so I think I'm missing something.

I wanted to be able to show you I could do this but I seem to be missing something.

snowmist69 · Jul 29, 2011, 04:04 PM

I'm trying it this way to

13.40X-7.40-208,530=0
6X= /6
X=

I still come up with a negative number

Just Looking · Jul 29, 2011, 04:08 PM

So close. X=number of units The only change you need is to apply X to the 7.40 as the variable costs are 7.40 per unit, or 7.40X.

snowmist69 · Jul 29, 2011, 04:18 PM

13.40X-7.40X-208,530=0
(80.40) - (44.40)- 208,530=0
6X=208,494
X=34,749 units

My numbers are negatives, am I getting close or still off

Just Looking · Jul 29, 2011, 04:23 PM

Your second line is wrong. X is the number of units you are solving for. To show 80.40 means you multiplied 13.4 x 6, and there's no reason to do that. What is 13.40x-7.40x? You show 6x and that is right. What is not right is the 208,494. The nice thing about this is that you can go back to the equation with the number of units you determine and check if it comes out right.

snowmist69 · Jul 29, 2011, 04:28 PM

It's 6, I was think I had to mutiply the 13.40 by 6 will try again.

13.40x-7.40X-208,530=0
6X=208524/6
X=34754

Just Looking · Jul 29, 2011, 04:32 PM

Let me show you an example.

If you have an equation that says:

5x-3x-50=0
2x-50=0
2x=50
x=50/2=25

You can double check:
5(25)-3(25)-50=0
125-75-50=0
That statement is correct so you know you solved correctly.

snowmist69 · Jul 29, 2011, 04:42 PM

Are my top numbers correct?

Just Looking · Jul 29, 2011, 04:44 PM

I'm not sure what you mean by your top numbers. Everything is fine except the $208,524/6 in your previous post. That line of your equation needs tweaking.

13.40x-7.40X-208,530=0
6X=208524/6 ------------------------> The 208524/6 isn't right.
X=34754

snowmist69 · Jul 29, 2011, 04:49 PM

OK thank you, that's the number I come up with when I subtract 13.40-7.40-208,530 I come up with 208,524 so I must be doing something wrong.

Just Looking · Jul 29, 2011, 04:53 PM

You are mixing things up. There is no 13.40-7.40. There is a 13.40x-7.40x. I gave you a very simple example to follow in post 9. Did that make sense to you?

snowmist69 · Jul 29, 2011, 05:00 PM

I think I have it.

13.40X-7.40X-208,530=0
6X-208,530=0
X=34,755

13.40(34,755)-7.40 (34,755)-208,530=0
465717-257187-208530=0

Just Looking · Jul 29, 2011, 05:00 PM

Yes!

Just Looking · Jul 29, 2011, 05:03 PM

So, that's the answer to #1. Now you have to do #2 and #3. My work day is done so I'm heading home. I'll check back later if you want to post those answers, or if you feel comfortable and don't need to have your answers checked that's good too.

snowmist69 · Jul 29, 2011, 05:04 PM

I was using the number I got when subtracting instead of using the FC number. I made a note of that.

snowmist69 · Jul 29, 2011, 05:34 PM

For question 2 my answer is
$13.40 *34,755=$465,717

3) 14.00X-7.40-175065=0
6.6X=175065
X=26,525

14.00(26525)-7.40(26525)-175065=0
371350-196285-175065=0

I think this correct but I wanted your opinion. Not so sure about question 2.
Thank you for your help.

Just Looking · Jul 29, 2011, 06:08 PM

Your answers are correct. The only thing is that you want your equation to be 14.00X-7.40x-175065=0

I think you knew that but just didn't type it.

You're welcome. :)