Question

Flower Depot, Inc. sells a single product for $10. Variable costs are $4 per unit and fixed costs total $120,000 at a volume level of 10,000 units. What dollar sales level would Flower Depot have to achieve to earn a target profit of $240,000

Answer 1

Break-even point (dollars)= $600,000

Step-by-step explanation:

Giving the following information:

Selling price per unit= $10

Variable costs per unit= $4

Fixed costs= $120,000

Desired profit= $240,000

To determine the sales level to achieve the desired profit, we need to use the break-even point in dollars formula:

Break-even point (dollars)= (fixed costs + desired profit) / contribution margin ratio

Break-even point (dollars)= (120,000 + 240,000) / [(10 -4)/10]

Break-even point (dollars)= 360,000/ 0.6

Break-even point (dollars)= $600,000