Question

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:a. 9,648

b. 8,760

c. 10,375

d. 10,560

Answer 1

Break-even point in units= 8,000 units

Instructions are below.

Step-by-step explanation:

Giving the following information:

Selling price= $25

Fixed expenses= $65,000 per year

Break-even point= 6,500 units

Desired profit= $15,000

First, we need to calculate the unitary contribution margin:

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

6,500= 65,000/ (25 - X)

162,500 - 6,500X= 65,000

15= unitary variable cost

Unitary contribution margin= (25 - 15)= 10

Now, we need to incorporate to the break-even point formula the desired profit:

Break-even point in units= (fixed costs + desired profit)/ contribution margin per unit

Break-even point in units= (65,000 + 15,000)/10

Break-even point in units= 8,000 units

To prove it:

Sales= (8,000*25)= 200,000

Total variable cost= (8,000*15)= (120,000)

Contribution margin= 80,000

Fixed costs= (65,000)

Net operation income= 15,000