Question

The Atlantic Company sells a product with a break-even point of 4,003 sales units. The variable cost is $94 per unit, and fixed costs are $196,147. Determine the following:

a. Unit sales price
b. Break-even point in sales units if the company desires a target profit of $70,805 units

Answer 1

The unit sales price is $141.77 and the break-even point in sales units for a target profit of $70,805 is approximately 5,071 units.

Step-by-step explanation:

To calculate the total revenue, we multiply the unit sales price by the number of units sold. In this case, the break-even point is 4,003 sales units and the fixed costs are $196,147. The variable cost per unit is $94. We can calculate the unit sales price by dividing the total cost (fixed costs plus variable costs) by the number of units sold at the break-even point.

Unit sales price = (Fixed costs + Variable costs) / Break-even point

Unit sales price = ($196,147 + ($94 x 4,003)) / 4,003 = $141.77

To calculate the break-even point in sales units if the company desires a target profit of $70,805, we can use the following formula:

Break-even point = (Fixed costs + Target profit) / Unit contribution margin

Unit contribution margin = Unit sales price - Variable cost per unit

Break-even point = ($196,147 + $70,805) / ($141.77 - $94) = 5,070.59 ≈ 5,071 sales units