Question

Khaling Company sold 26,850 units last year at $15.80 each. Variable cost was $11.70, and total fixed cost was $116,440. 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 $11,480 this year.

Answer 1

1.Operating Income (loss) (2122)

2. Break even point in units = 28126

3. Required Sales in Units=30899

Step-by-step explanation:

Khaling Company

Income Statement

Sales (26,850units* $ 15.84) $ 425304

Less

Variable Costs ( $11.70* 26580 units) $ 31,0986

Contribution Margin 114,318

Less Fixed Costs $116,440

Operating Income (loss) (2122)

2. Break even point in units = Fixed Costs/ Contribution Margin Per unit

= $116,440/$ 15.84-$11.70

=$116,440/ 4.14

= 28,125.6= 28126 units

We find the Contribution Margin Per unit by subtracting variable cost per unit from sales price per unit.

3. Required Sales in Units = Fixed Costs + Targeted Income/ Contribution Margin Per unit

=$116,440 +$11,480 /$ 15.84-$11.70

= 127920/4.14= 30898.5= 30899 units