Question

# The DeWayne Company sells binoculars for \$140 per unit. The variable cost is \$100 per unit...

The DeWayne Company sells binoculars for \$140 per unit. The variable cost is \$100 per unit while the

fixed costs are \$1,200,000.

Compute:

1. The anticipated break-even sales (units) for binoculars.
2. The sales (units) for binoculars required to realize the target operating income of \$400,000.
3. Determine the probable operating income (loss) if sales total of 32,000 units.
4. If the selling price goes up to \$150 per unit while all costs remain the same, what is the new break-even point?

 Break even point in units = Fixed cost/Unit contribution margin = 1,200,000/(140-100) = 1,200,000/40 = 30,000 units Units to be sold = (Fixed costs + Target profit)/Unit contribution margin = (1,200,000+400,000)/(140-100) = 1,600,000/40 = 40,000 units Probable operating income = Total Contribution margin - Fixed cost = (140-100)*32,000 units - 1,200,000 = 1,280,000 - 1,200,000 = 80,000 New unit contribution margin = 150 - 100 = 50 Breakeven point = 1,200,000/50 = 24,000 units

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