Name : Aldira Jasmine Rizky Arifin

NIM : 12010119190284

Class : Y.IUP

Exercise 6-3

Jaffre Enterprises distributes a single product whose selling price is $16 per unit and whose variable

expense is $11 per unit. The company’s fixed expense is $16,000 per month.

Required:

1. Prepare a profit graph for the company up to a sales level of 4,000 units.

2. Estimate the company’s break-even point in unit sales using your profit graph

Answer:

1. The profit graph:

Profit = Unit CM × Q − Fixed expenses

Profit = ($16 − $11) × Q − $16,000

Profit = $5 × Q − $16,000

As known:

Q=0

Q=4,000

The profit at these two levels of sales are -$16,000 (=$5 × 0 − $16,000) and $4,000 (= $5 × 4,000 −
$16,000).

Total sales revenue $16 x 4,000 = 64,000

Fixed expense $16,000

Variable expense $11 x 4,000 = 44,000

Total expense $60,000

 Profit Graph
$10,000
$5,000
$0
- 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000
-$5,000
Profit

-$10,000
-$15,000
-$20,000
-$25,000
Sales Volume in Unit

2. Looking at the graph, the break-even point appears to be 3,200 units.

This can be verified as follows:

Profit = Unit CM × Q − Fixed expenses

$5 × Q − $16,000

$5 × 3,200 − $16,000

$16,000 − $16,000

= $0