# Week 5 Assignment

Pages: 4 (607 words) Published: December 28, 2012
Instructor Assignment # 1.

1.Alex Miller, Inc., sells car batteries to service stations for an average of \$30 each. The variable cost of each battery is \$20 and monthly fixed manufacturing costs total \$10,000. Other monthly fixed costs of the company total \$8,000.

Required:

a.What is the breakeven point in batteries?
b.What is the margin of safety, assuming sales total \$60,000?
c.What is the breakeven level in batteries, assuming variable costs increase by 20%?
d.What is the breakeven level in batteries, assuming the selling price goes up by 10%, fixed manufacturing costs decline by 10%, and other fixed costs decline by \$100?

a. The breakeven point in batteries is:
\$30X-\$20X-\$18,000=0
\$10X-\$18,000=0
\$10X=\$18,000
X=\$18,000/\$10
X=1,800 batteries
The breakeven point in batteries is 1,800 batteries.

b. The margin of safety, assuming sales total \$60,000 is:
\$30*1,800 batteries=\$54,000
\$60,000 – (\$54,000)
The Margin of safety assuming sales total \$60,000 is \$6,000.

c. The breakeven level in batteries, assuming variable costs increase by 20% is:
VC=\$20*1.20
VC=\$24
\$30X-\$24X-\$18,000=0
\$6X-\$18,000=0
\$6X=\$18,000
X=\$18,000/\$6
X=3,000 batteries.
The breakeven level in batteries, assuming variable costs increase by 20% is 3,000 batteries.

d. SP=\$30*1.10
SP=\$33
Manufacturing FC=\$10,000*0.90
Manufacturing FC=\$9,000
OtherFC=\$8,000-\$100
OtherFC=\$7,900
\$33X-\$20X-\$9,000-\$7,900=0
\$13X-\$16,900=0
\$13X=\$16,900
X=\$16,900/\$13
X=1,300 batteries
The breakeven level in batteries, assuming the selling price goes up by 10%, fixed manufacturing costs decline by 10%, and other...