Question

Break-even sales and sales to realize operating income For the current year ended March 31, Cosgrove Company expects fixed costs of $545,400, a unit variable cost of $55, and a unit selling price of $82. a. Compute the anticipated break-even sales (units). units b. Compute the sales (units) required to realize operating income of $124,200. units

Answer 1

a. The anticipated break-even sales (units): 20,200 units

b. The sales (units) required to realize operating income of $124,200: 24,800 units

Step-by-step explanation:

a. The break-even point is the level of production at which the costs of production equal the revenues for a product and calculated by using following formula:

Break-even point in units = Fixed expense/(Selling price per unit-Variable expense per unit) = $545,400/($82 - $55) = 20,200 units

b. The number of units must be sold to meet the target profit figure are calculated by using following formula:

The number of units must be sold = (Total fixed cost + Targeted profit) / Contribution margin per unit.

Contribution margin per unit = Sales price per unit – Variable cost per unit = $82 - $55 = $27

The number of units must be sold = ($545,400 + $124,200)/$27 = 24,800 units