Question

Forest Company sells a product for $120 per unit. The variable cost is $50 per unit, and fixed costs are $392,000. Determine (a) the break-even point in sales units and (b) the break-even point in sales units required for the company to achieve a target profit of $152,880.

Answer 1

Instructions are below.

Step-by-step explanation:

Giving the following information:

Selling price per unit= $120

Unitary variable cost= $50

Fixed costs= $392,000

First, we need to calculate the break-even point in units and dollars, using the following formula:

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

Break-even point in units= 392,000/ (120 - 50)

Break-even point in units= 5,600 units

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

Break-even point (dollars)= 392,000 / (70/120)

Break-even point (dollars)= $672,000

Now, we need to determine the number of units to be sold for the desired profit of $152,880:

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

Break-even point in units= (392,000 + 152,880) / 70

Break-even point in units= 7,784 units