Question

The Power Tool Division of ABC Hardware sells one product, Jig Saw, and has the following data for the second quarter: Units of output 1,200 units Price per unit $ 150 Variable cost per unit 90 Total fixed costs 48,000 Required: Determine the following: 1. Quarterly operating profit when 1,200 units are sold. 2. Break-even volume in units. 3. Contribution margin ratio. 4. Break-even volume in sales dollars. 5. Sales dollars and units needed to generate an operating profit of $57,000. 6. Number of units sold that would produce an operating profit of 15% of sales dollars. 7.

Answer 1

Results are below.

Step-by-step explanation:

A)

We need to determine the profit when 1,200 units are sold:

Operating profit= total contribution margin - fixed costs

Operating profit= 1,200*(150 - 90) - 48,000

Operating profit= $24,000

B)

To calculate the break-even point in units, we need to use the following formulas:

Break-even point in units= fixed costs/ contribution margin per unit

Break-even point in units= 48,000 / (150 - 90)

Break-even point in units= 800 units

C)

Now, the contribution margin ratio:

Contribution margin ratio= (150 - 90) / 150

ontribution margin ratio= 0.4

D)

To calculate the break-even point in dollars, we need to use the following formulas:

Break-even point (dollars)= fixed costs/ contribution margin ratio

Break-even point (dollars)= 48,000/0.4

Break-even point (dollars)= $120,000

E)

Desired profit= $57,000

Break-even point in units= (fixed costs + desired profit) / contribution margin per unit

Break-even point in units= (48,000 + 57,000) / 60

Break-even point in units= 1,750

Break-even point (dollars)= (fixed costs + desired profit) / contribution margin ratio

Break-even point (dollars)= 105,000 / 0.4

Break-even point (dollars)= $262,500

F)

Desired profit= 15%

Number of units to be sold= Break-even point*1.15

Number of units to be sold= 800*1.15

Number of units to be sold= 920