Question

Target Profit Outdoors Company sells a product for $100 per unit. The variable cost is $40 per unit, and fixed costs are $486,000. Determine (a) the break-even point in sales units and (b) the break-even point in sales units if the company desires a target profit of $179,820. a. Break-even point in sales units units b. Break-even point in sales units if the company desires a target profit of $179,820 units

Answer 1

1. Break-even point in sales units = 8,100 units

2. BEP in sales units (Desires profit $179,820) = 11,097

Step-by-step explanation:

Given:

Sale price = $100 per unit

Variable cost = $40 per unit

Fixed costs = $486,000

Break-even point in sales units = ?

BEP in sales units (Desires profit = $179,820) = ?

Computation:

1. Break-even point in sales units = Fixed costs / (Sale price - Variable cost)

Break-even point in sales units = $486,000 / ($100 - $40)

Break-even point in sales units = $486,000 / ($60)

Break-even point in sales units = 8,100 units

2. BEP in sales units (Desires profit $179,820) = (Fixed costs + Desire profit) / (Sale price - Variable cost)

BEP in sales units (Desires profit $179,820) = ($486,000 + $179,820) / ($100 - $40)

BEP in sales units (Desires profit $179,820) = ($665,820) / ($60)

BEP in sales units (Desires profit $179,820) = 11,097