Question

COST VOLUME PROFIT ANALYSIS Comfort Homeless Inc, a factory that produces beds for homeless shelters, is considering extending its production and introducing a new bed with ungraded features this upcoming spring season. The selling price for the each of the beds is $48. Currently, to produce the beds, Comfort Homeless Inc states it cost $22. The variable cost total $6, whereas month fixed costs are $16,000. Instructions: a. Calculate the breakeven point in units .(20 points) b. Comfort Homeless Inc. increases its selling price from $48 a bed to $49.95 a bed. Calculate the new breakeven points in units. (20 points) c. Find the new breakeven point in units if the cost to produce the beds will decrease to $19 each because a new supplier was found when purchasing the raw materials. (20 points) d. Comfort Homeless Inc. is considering selling mattresses. It only expects to sell one mattress for every bed it sells. Comfort Homeless Inc. can purchase the mattresses for $5 each and sell them for $9 each. Total fixed cost should remain the same at $16,000 per month. Calculate the breakeven point in units for beds and mattresses. (40 points)

Answer 1

Instructions are below.

Step-by-step explanation:

Giving the following information:

Selling price per unit= $48

Unitary variable cost= $6

Total fixed costs= $16,000

A)

To calculate the break-even point in units, we need to use the following formula:

Break-even point in units= fixed costs/ contribution margin per unit

Break-even point in units= 16,000/ (48 - 6)

Break-even point in units= 381 units

B) Selling price= $49.95 a bedpoints

Break-even point in units= 16,000/ (49.95 - 6)

Break-even point in units= 364 units

C) Unitary variable cost= 6 - 3= 3

Break-even point in units= 16,000 / (48 - 3)

Break-even point in units= 356 units

D) Matresses= 1

Beds= 1

Proportions of sales:

Matreses= 0.5

Beds= 0.5

Selling price per matress= $9

Unitary variable cost= $5

Break-even point (units)= Total fixed costs / Weighted average contribution margin ratio

Weighted average contribution margin ratio= (weighted average selling price - weighted average unitary variable cost)

Weighted average contribution margin ratio= (0.5*9 + 0.5*48) - (0.5*5 + 0.5*6)

Weighted average contribution margin ratio= $23

Break-even point (units)= 16,000/23

Break-even point (units)= 696 units