Question

Target Profit Outdoors Company sells a product for $110 per unit. The variable cost is $65 per unit, and fixed costs are $288,000. Determine (a) the break-even point in sales units and (b) the break-even point in sales units if the company desires a target profit of $54,720.

Answer 1

Results are below.

Step-by-step explanation:

Giving the following information:

Target Profit Outdoors Company sells a product for $110 per unit. The variable cost is $65 per unit, and fixed costs are $288,000.

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= 288,000 / (110 - 65)

Break-even point in units= 6,400

Now, we incorporate the desired profit in the formula:

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

Break-even point in units= (288,000 + 54,720) / 45

Break-even point in units= 7,616 units