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27 July, 02:42

Yerke Company makes jungle gyms and tree houses for children. For jungle gyms, the price is $120 and variable expenses are $90 per unit. For tree houses, the price is $200 and variable expenses are $100. Total fixed expenses are $253,750. Last year, Yerke sold 12,000 gyms and 4,000 tree houses. Now suppose that Yerke expects tree house demand to increase from 4,000 to 8,000 units. What is the sales revenue at break-even?

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  1. 27 July, 03:03
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    Break Even Sales Volume in Dollars = $ 362,500

    Explanation:

    Break Even Sales Volume in Dollars = Fixed Costs / 1 - (variable Costs / Sales)

    = 253750 / 1 - (908,000/3040,000)

    = 253750 / 1-0.298

    = 253750 / 1-0.3

    = 253750 / 0.7

    = $ 362,500

    Working for Extra units

    Total Variable Cost for 8000 units = $ 908,000

    Variable Expenses for jungle gyms $ 90 * 12000 = 108,0000

    Variable Expenses for tree houses $100 * 8000 = 800,000

    Total Sales for 8000 units =

    Jungle gyms $ 120 * 12000 = 144,0000

    Tree houses $200 * 8000 = 1600,000

    Total Sales $ 3040,000

    Working

    Total Cost

    Variable Expenses for jungle gyms $ 90 * 12000 = 108,0000

    Variable Expenses for tree houses $100 * 4000 = 400,000

    Fixed Expenses $253,750

    Total Cost $1733750

    Total Sales

    Jungle gyms $ 120 * 12000 = 144,0000

    Tree houses $200 * 4000 = 800,000

    Total Sales $ 2240,000
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