We use cookies to give you the best experience possible. By continuing we’ll assume you’re on board with our cookie policy

Kajli Agrawal

The whole doc is available only for registered users
  • Pages: 2
  • Word count: 284
  • Category: Camera

A limited time offer! Get a custom sample essay written according to your requirements urgent 3h delivery guaranteed

Order Now

Breakeven analysis Klear Camera Company is considering introducing a new video camera. Its selling price is projected to be $1,000 per unit. Variable manufacturing costs are estimated to be $500 per unit. Variable selling costs are 10% of sales dollars. The company expects the annual fixed manufacturing costs for the new camera to be $3,500,000. Required

(a) Compute Klear’s contribution margin per unit and contribution margin ratio. (b) Determine the number of units Klear must sell to break even. (c) Klear is considering a design modification that would reduce the variable cost of the camera by $50 per unit. Explain whether this change will cause Klear’s breakeven point to increase or decrease, compared to the initial plans. Solution

(a) Contribution Margin Per Unit = Sales Price Per Unit – Total Variable Costs Per Unit $1000.00-$500.00-$100.00=$400.00 Contribution Margin Ratio = Contribution Margin Per Unit/Sales Price Per Unit $400.00/$1000.00=0.40 (b) Assume X number of units, Klear must sell to break even

Selling Price for X units = $1000.00X
Total Variable Costs for X units = $600.00X
Selling Price = Annual Fixed Manufacturing Costs + Total Variable Costs

$1000.00X = $3,500,000.00+$600.00X

$1000.00X -$600.00X=$3,500,000.00

X=8750.00 Units

(c) Variable cost is indirectly proportional to the contribution margin per unit so if the variable cost per unit will decrease, the contribution margin per unit will increase.

Breakeven Points = Fixed Costs/ Contribution Margin

So the Breakeven Point will decrease.

New contribution margin per unit = $1000.00 -$450.00 = $450.00

New Breakeven Point = $3,500,000.00/$450.00=7,778.00 units (Rounded up)


Atkinson, A., Kaplan, R., EM, & Young, SM. (2012), Management Accounting: Information for Decision-Making and Strategy Execution, 6th Edition.

Related Topics

We can write a custom essay

According to Your Specific Requirements

Order an essay
Materials Daily
100,000+ Subjects
2000+ Topics
Free Plagiarism
All Materials
are Cataloged Well

Sorry, but copying text is forbidden on this website. If you need this or any other sample, we can send it to you via email.

By clicking "SEND", you agree to our terms of service and privacy policy. We'll occasionally send you account related and promo emails.
Sorry, but only registered users have full access

How about getting this access

Your Answer Is Very Helpful For Us
Thank You A Lot!


Emma Taylor


Hi there!
Would you like to get such a paper?
How about getting a customized one?

Can't find What you were Looking for?

Get access to our huge, continuously updated knowledge base

The next update will be in:
14 : 59 : 59