Question

Narchie sells a single product for $60. Variable costs are 50% of the selling price, and the company has fixed costs that amount to $705,000. Current sales total 19,000 units. After the break -even point each unit that Narchie sells will: In order to produce a target profit of $15,000, Narchie's dollar sales must total: If Narchie sells 24,000 units, its safety margin will be

Answer 1

Answer of each requirement of question is given below.

break -even point

BE = fixed cost/contribution = 705,000/ 30 = 23,500 units

In order to produce a target profit of $15,000, Narchie's dollar sales must total

= (fixed cost + Target profit) Contribution

= 705,000 + 15,000/ 30 = 24,000 units

= 24,000* 60 = $ 1,440,000

If Narchie sells 24,000 units, its safety margin will be

MOS = Unit sold - Break even = 24,000 - 23,500 = 500 units