I am working on a project that has to deal with Break even points, fixed cost and varible cost, I am not understanding how to do this. any help would be nice. Here is the balance sheet that I am working of of. I have to find the fixed cost, break even point and variable cost...
XYZ NONPROFIT CORPORATION
BALANCE SHEET
2002 (A) 2003 (A) 2004 (A)
ASSETS
Current assets
Cash $2,576.00 $20,904.00 $86,971.00
Investments $12,000.00 $12,000.00 $12,000.00
Accounts Receivables, net $88,764.00 $47,884.00 $199,905.00
Prepaid expense $956.00 $1,270.00 $4,026.00
Total Current Assets $104,296.00 $82,058.00 $302,902.00
Property and equipment, net
Land $192,300.00 $193,372.00 $193,372.00
Furniture and equipment $59,135.00 $61,053.00 $92,267.00
Leasehold improvements $35,539.00 $23,380.00 $110,463.00
Total property and equipment $286,974.00 $277,805.00 $396,102.00
TOTAL ASSETS $391,270.00 $359,863.00 $699,004.00
LIABILITIES AND NET ASSETS
LIABILITIES
Current liabilities
Accounts payable $74,826.00 $39,951.00 $104,201.00
Accrued payroll and related liabilities $57,888.00 $45,954.00 $66,359.00
Note payable (current portion) $6,303.00 $8,070.00 $166,161.00
Capital lease obligation (current portion) $0.00 $0.00 $312.00
Total current liabilities $139,017.00 $93,975.00 $337,033.00
Note payable (long term) $0.00 $0.00 $1,904.00
Capital lease obligation (long term) $171,229.00 $166,004.00 $0.00
Total liabilities $310,246.00 $259,979.00 $338,937.00
NET ASSETS
Unrestricted ($38,418.00) ($105,127.00) $27,202.00
Temporarily restricted $119,442.00 $205,011.00 $332,865.00
Total net assets $81,024.00 $99,884.00 $360,067.00
TOTAL LIABILITIES AND NET ASSETS $391,270.00 $359,863.00 $699,004.00
If you are trying to copy and paste, it's not working. You'll need to type in the rest of your assignment by hand.
Exercise 10.1
Variable Cost =
=
= $3.93
Variable Cost = $3.93 per unit
Fixed Costs:
At an activity level of 4,900, Total Cost = $26,000
Since Total Cost = Variable Cost + Fixed Cost
So:
$26,000 = Fixed Costs + $3.93x (where x is the number of meals served)
$26,000 = Fixed Cost + $3.93(4,900)
$26,000 = Fixed Cost + $19,250
Fixed Cost = $26,000 - $19,250
= $6,750
Fixed Costs = $6,750
Since the Price of the meal is $5.77, and since at BEP, Revenue = Cost, we can calculate the BEP as follows:
$5.77x = $6,750 + $3.93x
$5.77x - $3.93x = $6,750
$1.84x = $6,750
x = $6,750 ÷ $1.84
x = 3,669 meals (monthly)
The annual BEP = 3,669 × 12
= 44,022 meals
To reach the BEP, the WHDM program needs to provide 44,022 meals during the fiscal year.
If 45,000 meals are served, then Total revenue would be:
45,000 × $5.77 = $259,650
At 44,022 meals (BEP), total revenue = 44,022 × $5.77 = $254,007
Therefore if the 45,000 meals contract is completed, the profit = $259,650 - $254,007
= $5,643
If 45,000 meals are served, then Profit would be $5,643
Exercise 10.1—Answer Key
Westchester Home Delivered Meals Program
(Profit Analysis)
Total Contracted Meals = 45,000
Break Even Point = 43,992
_______
1,008
Revenue
1,008 Meals
@ $5.77 = $5,816.16
Total Cost
Per 1,008 Meals
@ $3.93
Variable Costs = $3,961.44
Total Profit = $5,816.16 - $3,961.44 = $1,854.72
Exercise 10.2
New River Community Council
The new BEP is 387
The new BEP is not a feasible solution because there will not be much profit.
Slack capacity will exist
Nicole,
You did not provide the calculations for this exercise, so I do not know how you worked out this problem.
Exercise 10.2
New River Community Council
Newsletter Break Even Point
PX = A + BX
20X = 6,000 + 3,900 + 4.50X
20X = 9,900 + 4.50X
(Subtract 4.50 X From Both Sides)
15.5X = 9,900
X = 639
Maximum Capacity = 650
Break Even Point = 639
Surplus Capacity = 11
Note: There are two elements of fixed costs in this example. The salary
of the Newsletter Coordinator ($6,000 per year) and the salary of
the assistant ($3,900 per year)
Exercise 10.3
Mountain View Senior Adult Program
$4000/month allocated
$65/ client
$4000/month full-time salary
$10/client for supplies
120 maximum clients/ nurse/ month
12*4000=$48000 allocated/year
Let X=number of clients per year
$4000*12=$48000/year full-time salary/nurse
Break-Even Points
1 Full-Time Nurse
48000+65X=(48000+10X)
48000-48000=10X-65X
-55X=0
X=0 Clients/year
2 Full-Time Nurses
48000+65X=2*48000+10X
48000-96000=10X-65X
-55X=-48000
X=48000/55=873 Clients/year
X=2*12*120=2880 maximum clients/year
3 Full-Time Nurses
48000+65X=144000+10X
48000-144000=10X-65X
-55X=48000-144000
X=(48000-144000)/-55=1745 Clients/year
X=3*12*120= 4320 maximum clients/year
Part-Time Nurses
48000+65X=12*45*X
12*45*X=48000
X=48000/(12*45)=89 Clients/year
The break-even points differ because the total salaries are different.
With 1 full-time nurse the break-even point occurs when there are no clients. I do not think that this is not feasible because the whole amount allocated would go to the nurse and the nurse wouldn’t have to do anything for their salary.
If I were the executive director I would choose the direct method with three nurses because the break-even point would allow the maximum number of clients to be served compared to the other choices.
Exercise 10.3—Answer Key
Mountain View Senior Adult Program
Direct Service/Contract Service Delivery Decision
1. Break Even Point (With One Nurse)
PX = A + BX
65X = 4000 + 4000 + 10X
(4000 overhead + 4000 salary for one nurse)
65X = 8000 + 10X
(Subtract 10X from Both Sides)
55X = 8000
(Divide Each Side By 55)
X = 146 hours of service (BEP per month)
Note: This BEP is outside the feasible range because one nurse
can only provide 120 hours of service per month.
Surplus Capacity (120 - 146 = None)
Exercise 10.3
Mountain View Senior Adult Program
Direct Service/Contract Service Delivery Decision
2. Break Even Point (With Two Nurses)
PX = A + BX
65X = 4000 + 4000 + 4000 + 10X
(4000 overhead + 8000 salary for two nurses)
65X = 12000 + 10X
(Subtract 10X from Both Sides)
55X = 12000
(Divide Each Side By 55)
X = 219 hours of service (BEP per month)
Note: This BEP is within the feasible range because two nurses
can provide a maximum of 240 (120 x 2) hours of
service per month.
Surplus Capacity (240 - 219 = 21)
Exercise 10.3
Mountain View Senior Adult Program
Direct Service/Contract Service Delivery Decision
3. Break Even Point (With Three Nurses)
PX = A + BX
65X = 4000 + 4000 + 4000 + 4000 + 10X
(4000 overhead + 12000 salary for three nurses)
65X = 16000 + 10X
(Subtract 10X from Both Sides)
55X = 16000
(Divide Each Side By 55)
X = 291 hours of service (BEP per month)
Note: This BEP is within the feasible range because two nurses
can provide a maximum of 360 (120 X 3 ) hours of
service per month.
Surplus Capacity (360 - 291 = 69)
Exercise 10.3—Answer Key
Mountain View Senior Adult Program
Direct Service/Contract Service Delivery Decision
1. Break Even Point (With Contract Service Delivery)
PX = A + 45X
65X = 4000 + 45X
(4000 overhead)
65X = 4000 + 45X
(Subtract 45X from Both Sides)
20X = 4000
(Divide Each Side By 20)
X = 200 hours of service (BEP per month)
Note: This BEP is within the feasible range because one, two
three or any number of contract nurses can be used.
Surplus Capacity (200 - 200 = ZERO)
Overall, you did well with the assignment. There was one problem/concern with the Exercise #2. The most important point here is that students will read the instructions and try to calculate the solutions.
I have included the answer key/solution
To calculate the fixed cost, variable cost, and break-even point, you will need additional information beyond the balance sheet provided. Specifically, you will need information on the revenue generated by the XYZ Nonprofit Corporation.
Let's break down the concepts:
1. Fixed Cost: Fixed costs are those costs that do not vary with the level of production or sales. These costs remain constant regardless of the volume or activity level. Examples of fixed costs include rent, insurance, salaries of permanent employees, etc. To calculate the fixed cost, you would need to identify the specific fixed costs incurred by the organization. Unfortunately, the balance sheet provided does not offer this information. You may need to review the organization's financial statements or consult with someone familiar with the organization's expenses to determine the fixed costs.
2. Variable Cost: Variable costs are costs that change with the level of production or sales. These costs are directly related to the volume of activity. Examples of variable costs include raw materials, direct labor, etc. Similar to fixed costs, the balance sheet does not provide the information required to calculate the variable costs. You will need to review the organization's financial statements or consult with someone familiar with the organization's expenses to determine the variable costs.
3. Break-Even Point: The break-even point is the level of sales or activity at which the company neither makes a profit nor incurs a loss. It is the point where total revenue equals total costs. To calculate the break-even point, you need to know the contribution margin ratio and the fixed costs. The contribution margin ratio is the difference between the sales revenue and variable costs divided by the sales revenue. With this information, you can use the break-even formula: Break-even point = Fixed costs / Contribution margin ratio.
Unfortunately, the balance sheet provided does not offer the necessary information to calculate the break-even point.
In summary, to calculate the fixed cost, variable cost, and break-even point for your project, you will need additional information on the revenue generated by the XYZ Nonprofit Corporation, as well as specific details about the organization's expenses. Consult with financial statements or individuals familiar with the organization's finances to obtain these details.