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The following relationships exist for Dellva Industries, a manufacturer of electronic...

Question:

The following relationships exist for Dellva Industries, a manufacturer of electronic components. Each unit of output is sold for $45; the fixed costs are $175,000, of which $110,000 are annual depredation charges; and variable costs are $20 per unit.

a. What is the firm's gain or loss at sales of 5,000 units? Of 12,000 units?

b. What is the operating breakeven point?

c. Assume Dellva is operating at a level of 4,000 units. Are creditors likely to seek the liquidation of the company if it is slow in paying its bills?

Creditors:

Creditors are those who sell goods to the company on credit. Credit purchase is one of the main sources of short-term financing for businesses. The higher the credit period a firm enjoys on its purchases, the better it is for the business.

Answer and Explanation: 1

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a. Calculation of profit or loss at levels of 5,000 and 12,000 units:

Particulars 5,000 units 12,000 units
Sales $45 $45
Less: Variable cost $20 $...

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How to Calculate the Break-Even Point - Definition & Formula

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Chapter 5 / Lesson 28
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See how to calculate break-even point (in units and dollars). See the variables of the break-even point formula and examples. Understand the purpose of break-even analysis.


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