hsm 260

Many of you did not receive the answer key attached to your week 5 assignments on BEPs (Exercise 10.1 & 10.2). Saved MS Word files were corrupted on my flash drive and i was unable to open them. However, I am attaching the answer key for BEP calculations to exercise 10.2 of week 5. This is similar to Part II of your final. I hope it helps as a guideline

Worksheet

Step 1

We have pieces of information in the story problem

·      Their current number of subscribers is 525.

·      The newsletter coordinator gets $6000 per year in salary (fixed costs)

·      The assistant coordinator gets $3900 per year in salary (fixed costs)

·      TOGETHER, THE SALARY FOR THE NEWSLETTER FOLKS - $9900

·      They can handle 650 newsletters

·      They have decided upon a new subscription price of $20

·      The variable costs of producing the newsletters has risen to $4.50

Step 2

Let’s figure the BEP

The formula is

Px = A + Bx

X=Unit cost or price

A=fixed costs

B=Variable costs

20x = 9900 + 4.50x

(THE NEW PRICE OF THE NESLWETTER-$20 = THE FIXED COST OF THESE TWO COORDINATORS-$9900 + THE VARIABLE COSTS OF THE NEWSLETTER PRODUCTION-$4.50)

20x = 9900 + 4.50 x

15.50x = 9900

X = 9900/15.50

X = 639 (rounded)

They will need to produce 639 papers to break even.  They can handle and do 650 papers.  Hence they will have 11 papers left over.  That is not a bad surplus.