An Investment Proposal Will Have Annual Fixed Costs of $60,000

question 106

Essay

An investment proposal will have annual fixed costs of $60,000, variable costs of $35 per unit of output, and revenue of $55 per unit of output.
(A) Determine the break-even quantity.
(B) What volume of output will be needed to produce an annual profit of $60,000?
FC = $60,000 per year, VC = $35 per unit, REV = $55 per unit

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Definitions:

Departmental Income Statement

A financial statement that shows the revenue, expenses, and net income for each department within a company, helping to track the performance of distinct areas of the business.

Cost of Goods Sold

The costs incurred directly from the production of goods a company offers for sale, which include material and labor expenses.

Direct Expenses

Direct expenses are costs that can be directly traced to a specific cost object, such as a product, department, or project.

Departmental Contribution Margin

The difference between sales revenue and variable costs for a specific department, indicating its contribution to the overall profit.