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15-9A. (Fixed costs and the break-even point) A & B Beverages expects to earn $50,000 next year
after taxes. Sales will be $375,000. The store is located near the shopping district surrounding
Blowing Rock University. Its average product sells for $27 a unit. The variable cost per unit is
$14.85. The store experiences a 40 percent tax rate.
a. What are the store's fixed costs expected to be next year?
b. find out the store's break-even point in both units and dollars.

15-13A. (Break-even point and operating leverage) Allison Radios manufactures a complete line of
radio and communication equipment for law enforcement agencies. The average selling price of
its finished product is $180 per unit. The variable cost for these same units is $126. Allison
Radios incurs fixed costs of $540,000 per year.
a. What is the break-even point in units for the company?
b. What is the dollar sales volume the firm must achieve in order to reach the break-even
point?
c. What would be the firm's profit or loss at the following units of production sold:
12,000 units? 15,000 units? 20,000 units?
d. Find the degree of operating leverage for the production and sales levels given in part (c).

 

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