Question

Khaling Company sold 26,900 units last year at $16.50 each. Variable cost was $11.60, and total fixed cost was $136,710. Required: 1. Prepare an income statement for Khaling for last year. 2. Calculate the break-even point in units. 3. Calculate the units that Khaling must sell to earn operating income of $15,680 this year.

Answer 1

Instructions are below.

Step-by-step explanation:

Giving the following information:

Khaling Company sold 26,900 units last year at $16.50 each. The variable cost was $11.60, and the total fixed cost was $136,710.

1) Income statement:

Sales= 26,900*16.5= 443,850

Variable costs= 26,900*11.6= (312,040)

Contribution margin= 131,810

Fixed costs= (136,710)

Net operating income= (4,900)

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

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

Break-even point in units= 136,710 / (16.5 - 11.6)

Break-even point in units= 27,900units

3) Now, we need to include the desired profit to the break-even point formula:

Break-even point in units= (136,710 + 15,680) / 4.9

Break-even point in units= 31,100 units