TWO SEPARATE QUESTIONS (Break-Even-Analysis)

1. At a volume of 125,000 units a company’s variable costs are $600,000, fixed costs are $50,000 and profits are $15,000. What is the B.E.P.? How much sales volume does it take to produce profits equal to cost reduction of $500?

2. A company has capacity to produce 600,000 units of a product per year. At present it is operating at 65% of capacity and has an annual income of $425,000. Fixed costs are $200,000; variable costs are $0.60 per unit. What is the company’s profit or loss? What is the B.E.P.? What would the profit be at 80% of capacity?