Finance and Accounting Issues - Assignment Example

I have done the computation to help you with your four questions. The computations and explanations on how the answers were arrived at are clearly discussed below for your perusal.  I have done the computation to help you with your four questions. The computations and explanations on how the answers were arrived at are clearly discussed below for your perusal. The second situation shows the selling price is raised to $25,000 per boat. Consequently, the breakeven sales amount is the sale that results in the same zero profits (Hilton, 2011). Since the fixed cost is $24,000. There must be enough sales cash inflow to defray the $24,000 fixed cost amount.

Consequently, the contribution margin must be equal to the $24,000 fixed costs amount to arrive at the same zero profit. Likewise, the data shows that each boat generates variable costs amounting remains at $8,000.
Since the unit selling price for each boat is $25,000 and the total variable cost of each boat is $8,000, then the contribution margin is raised to $17,000 per boat. To arrive at the breakeven sales, the $24,000 fixed cost amount is divided by the $12,000 contribution margin per boat. The sales (breakeven) is 1.41units. This is arrived at by dividing the $24,000 fixed costs by the higher contribution margin, $17,000 per boat. To arrive at the breakeven sales amount, the breakeven sales unit, 1.41, is multiplied by the higher unit selling price per boat, $25,000. Consequently, the breakeven sales amount is $35,250.

Question 3 seeks the breakeven sales needed to generate a $50,000 profit at a $25,000 unit selling price (Hilton, 2011). Since the fixed cost is $24,000. There must be enough sales cash inflow to defray the $24,000 fixed cost amount. Consequently, the contribution margin must be equal to the sum of the $24,000 fixed costs amount and the $50,000 profit. Consequently, the contribution margin is $74,000. Likewise, the data shows that each boat generates variable costs amounting remains at $8,000.

Since the unit selling price for each boat is $25,000 and the total variable cost of each boat is $8,000, then the contribution margin is raised pegged at $17,000 per boat. To arrive at the breakeven sales, the contribution margin, $74,000, is divided by the $17,000 contribution margin per boat. The resulting sales (breakeven) are 4.35 units. To arrive at the breakeven sales amount, the resulting breakeven sales unit, 4.35, is multiplied by the higher unit selling price per boat, $25,000. Consequently, the breakeven sales amount is $108,823.53.

As proof that the mathematical process of arriving at the sales amount, $ 108,823.53 total sales will result in $50,000 profit, the above table is presented (Hilton, 2011).
Hoping the mathematical explanations will satisfy your four questions.