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?

Please show work, thanks!!

Homework Answers

Answer #1

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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