Break even, CVP, potential cost structure change, employee reaction Ersatz manufactures a single product. What is Ersatz Break even point in units? Draw a CVP chart showing the 2 level of activity break even point? If Ersatz plans to sell 1300 units what will pretax income be? Management expects that variable costs and selling prices will rise by 3% but fixed costs will not change. What will the new break even point be?
Income Statement: Activity levels
Volume 1000units 1500units
Sales @100 ea $100,000 $150,000
Less the variable expenses
Manufacturing @ 40 ea $40,000 60,000
Selling @10 ea 10,000 15,000
Administration @ 6 ea 6,000 9,000
contribution margin 44,000 66,000
less fixed expenses
manufacturing 10,000 10,000
Selling 11,000 11,000
Administration 20,000 20,000
Pretax income $3000 $25,000