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Ferkil Corporation manufacturers a single product that has a selling price of $25.00 per unit. Fixed expenses total $65,000 per year, and the company must sell 6,500 units to break even.

If the company has a target profit of $15,000, sales in units must be _____.

2 Answers

3 votes

Final answer:

To achieve a target profit of $15,000, Ferkil Corporation must sell 3,200 units, calculated by dividing the sum of fixed costs and target profit by the selling price per unit since variable costs are not provided.

Step-by-step explanation:

To determine the sales in units required for Ferkil Corporation to achieve a target profit of $15,000, we start by understanding the break-even point. We are told that the company must sell 6,500 units to break even, where fixed expenses total $65,000 per year. The selling price per unit is $25.00.

The break-even point in sales units is when total revenue equals total costs, consisting of fixed costs plus variable costs. As variable costs are not provided, we assume them to be constant per unit and subsumed within the break-even calculation.

To find out how many units need to be sold to achieve a target profit, the following formula is used:

Sales units for target profit = (Fixed costs + Target profit) / (Selling price per unit - Variable cost per unit)

However, without the variable cost per unit, we will use the break-even units as a starting point:

Target profit in total revenue = Target profit + Fixed costs = $15,000 + $65,000 = $80,000

Sales units for target profit = $80,000 / $25.00 = 3,200 units

Therefore, to achieve a $15,000 target profit, the company must sell 3,200 units.

User Shaurya
by
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4 votes

Answer:

8,000 units

Step-by-step explanation:

Given that,

Selling price = $25.00 per unit

Total fixed expenses = $65,000 per year

Break even sales in units = 6,500

Target profit = $15,000

Break-even sales in dollar value:

= Break even sales in units × Selling price per unit

= 6,500 × $25.00 per unit

= $162,500

Break-even Point = Fixed Costs ÷ Contribution Margin per Unit

$162,500 = $65,000 ÷ Contribution Margin per Unit

Contribution Margin per Unit = $65,000 ÷ $162,500

= $0.4 per unit

Sales amount:

= (Fixed costs + Target profit) ÷ Contribution margin per unit

= ($65,000 + $15,000) ÷ $0.4 per unit

= $200,000

Therefore,

Sales in units = Sales in amount ÷ Selling price per unit

= $200,000 ÷ $25

= 8,000 units

User Cryptomanic
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