Reference no: EM132594439
1) Breakeven point: Algebraic and graphical Fine Leather Enterprises sells its single product for $129.00 per unit. The firm's fixed operating costs are $473,000 annually, and its variable operating costs are $86.00 per unit. a. Find the firm's operating breakeven point in units. b. Label the x axis "Sales (units)" and the y axis "Costs/Revenues ($)," and then graph the firm's sales revenue, total operating cost, and fixed operating cost functions on these axes. In addition, label the operating breakeven point and the areas of loss and profit (EBIT).
2) Breakeven analysis Anke Perks is opening an arts and crafts store that focuses on canvases, paints, and pencils. The selling price of a canvas is $24. The variable operating costs are $14 per canvas while the fixed operating costs are $4,000. a. Calculate how many canvases Anke needs to sell to reach her operating breakeven point. b. Calculate the total operating costs at the breakeven point based on part a. c. Anke's business plan assumed that she would be able to sell 420 canvases per month. Will Anke be able to make a profit at this sales level? d. How much EBIT will Anke generate if she sells 420 canvases per month?
3) Breakeven analysis Paul Scott has a 2008 Cadillac that he wants to update with a GPS system so that he will have access to up-to-date road maps and directions. Aftermarket equipment can be fitted for a flat fee of $500, and the service provider requires monthly charges of $20. In his line of work as a traveling salesperson, he estimates that this device can save him time and money, about $35 per month (as the price of gas keeps increasing). He plans to keep the car for another 3 years. a. Calculate the breakeven point for the device in months. b. Based on a, should Paul have the GPS system installed in his car?
4) Breakeven point: Changing costs/revenues JWG Company publishes Creative Crosswords. Last year, the book of puzzles sold for $10, with a variable operating cost of $8 per book and a fixed operating cost of $40,000. a. How many books must JWG sell this year to achieve the breakeven point for the stated operating costs if all figures remain the same as for last year? b. How many books must JWG sell this year to achieve the breakeven point for the stated operating costs if fixed operating costs increase to $44,000 and all other figures remain the same? c. How many books must JWG sell this year to achieve the breakeven point for the stated operating costs if the selling price increases to $10.50 and all costs remain the same as for last year? d. How many books must JWG sell this year to achieve the breakeven point for the stated operating costs if the variable operating cost per book increases to $8.50 and all other figures remain the same? e. What conclusions about the operating breakeven point can be drawn from your answers?
5) Cobalt Industries had sales of 150,000 units at a price of $10 per unit. It faced fixed operating costs of $250,000 and variable operating costs of $5 per unit. The company is subject to a tax rate of 38% and has a weighted average cost of capital of 8.5%. Calculate Cobalt's net operating profits after taxes (NOPAT), and use it to estimate the value of the firm.