Allison Radios manufactures a complete line of radios and communication equipment for law enforcement agencies.
FIN 370 15-13A (Breakeven point and operating leverage)
Financial Management Principles and Applications by Arthur j. Keown
Axia College of University of Phoenix (UoP) SOLUTION
15.13A (Breakeven point and operating leverage) Allison Radios manufactures a complete line of radios and communication equipment for law enforcement agencies. The average selling price of its finished product is $180 per unit. The variable cost for these same units is $126. Allison Radios incurs fixed costs of $540,000 per year.
a. What is the break-even point in units for the company?
b. What is the dollar sales volume the firm must achieve in order to reach the break-even point?
c. What would be the firm’s profit or loss at the following units of production sold: 12,000 units? 15,000 units? 20,000 units?
d. Find the degree of operating leverage for the production and sales levels given in part (c).
