Question

Break-even sales and sales to realize operating incomeFor the current year ended March 31, Cosgrove Company expects fixed costs of $465,000, a unit variable cost of $62, and a unit selling price of $92.a. Compute the anticipated break-even sales (units).fill in the blank 1 unitsb. Compute the sales (units) required to realize operating income of $108,000.fill in the blank 2 units

Answer 1

Break even point in units=15,500 units

Units to achieve target profit=19,100 units

Step-by-step explanation:

Break-even point is the level of activity at which a firm must operate such that its total revenue will equal its total costs. At this point, the company makes no profit or loss because the total contribution exactly equals the total fixed costs

Break-even point (in units) is calculated using this formula:

Break even point in units = Total general fixed cost/ (selling price - Variable cost)

Break even point in units= $465,000/(92-62)=15,500 units

Units to achieve target profit = (Total general fixed cost for the period + target profit)/ contribution per unit

Units to achieve target profit of 108,000 = ($465,000+ 108,000)/ (92-62)=19,100 units

Break even point in units=15,500 units

Units to achieve target profit=19,100 units