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Carpets corpration - Case Study Example

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Summary

The breakeven point of each product and the profit on each product’s breakeven is finding out in this calculation.
To calculate the break even for each of the product, it has been…

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Subject: Finance & Accounting
Type: Case Study
Level: Ph.D.
Pages: 1 (250 words)
Downloads: 2
Author: greenfeldermega

Extract of sample "Carpets corpration"

INTRODUCTION The carpets corporation sells three types of carpet that are French, Meditrainian and Welsh. The breakeven point of each product and theprofit on each product’s breakeven is finding out in this calculation.BREAK EVEN FOR THE COMPANYBreak even is calculated using the formula below: Breakeven pointFixed Cost price –variable cost Frenchmeditrainianwelshvariable cost per unit1.20.80.5price per unit21.40.8no of units sold100,000200,000300,000fixed cost per carpet type18,00096,00060,000total fixed cost of company282,000total variable cost2.

50total price4.20total no of units600,000Calculation: 282,000/ (4.20-2.50) =165,882 * 4.20 = $696705Breakeven of the firm is found to be $696,705BREAK EVEN FOR EACH PRODUCT IN QUANTITY AND IN DOLLARSTo calculate the break even for each of the product, it has been assumed that the company would produce only that particular product and other products will not be produced. So break even of each of the product has been calculated keeping in mind that the company only produces that particular product.

Total fixed cost of the firm is $282,000. However if the company will not be producing any one type of product, then the fixed cost of producing that particular product will not be considered. Fixed costFrenchMeditrainianwelshFixed cost avoidable18,00096,00060,000Total Fixed Cost282,000If the company only produces frenchNet fixed cost126,000Break even in Units157,500Break even in dollars315,000If the company only produces meditrainNet fixed cost204,000Break even in Units340,000Break even in dollars476,000If the company only produces welshNet fixed cost168,000Break even in Units560,000Break even in dollars448,000PROFITABILITY OF THE COMPANY AT BREAKEVEN POINTWhen the company sells breakeven quantity of each product then the profit on each product will be zero because at breakeven point the company covered its overall cost of the production.

So, the breakeven point is where the company earns no profit and incurs no losses (McLaney, 2009) When a single unit is sold over the breakeven quantity then the company started earning profit on each selling unit. For instance, as calculated in the first question the sales of the company are found to be $696,706 and at this point the following table shows that the net profit of the company is $0.Sales at breakeven$696705.88Variable cost$414705.88Fixed cost$282000Net profit 0 ReferencesMcLaney, E. (2009). Business Finance: Theory and Practice.

Pearson Education: New Jersey.

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