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?

Question

Business

Kayden Mcmillan

7 September, 09:35

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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Answers (1)

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Graham Jacobs · Answer 1

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