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2-41 Multiple Breakeven Points

2-41 Multiple Breakeven Points
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MANAGEMENT ACCOUNTING
Management Accounting (Atkinson), 5th Edition
2-41 (Multiple Breakeven Points) In September 2006, Capetini Capacitor Company sold capacitors to its distributors for 250.00 per capacitor. The sales level of 3,000 capacitors a month was less than the single-shift capacity of 4,400 capacitors at its plant located in San Diego. Variable production costs were $100.00mper capacitor, and fixed production costs were 200,000 per month. In addition, variable selling and distribution support costs are $20.00 per capacitor, and fixed selling and distribution support costs are $62500.00 per month. At the suggestion of the marketing department, In October 2006 Capetini reduced the sales price to $200.00and increased the monthly advertising budget by $17,500. Sales are expected to increase to 6,800 capacitors per month. If the demand exceeds the single-shift capacity of 4,400 capacitors, the plant needs to be operated in two shifts. Two shift operation will increase monthly fixed production costs to 310,000.
a) Determine the contribution margin per capital in September 2006
b) Determine the sales level in number of capacitors at which the profit-to-share ratio would be 10% in September 2006.
c) Determine the two breakeven points for October 2006
d) Determine the sales level in number of capacitors at which the profit-to-sales ratio in October is the same as the actual profit-to-share ratio in September. Is there more than one possible sales level at which the equality would occur?

 

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