Legrand Company produces hand cream in plastic jars. Each jar sells for $3.40. The variable cost for each jar (materials, labor, and overhead) totals $2.55. The total fixed cost is $58,140. During the most recent year, 81,600 jars were sold.
|1.||What is the break-even point in units for Legrand? What is the margin of safety in units for the most recent year?|
|2.||Prepare an income statement for Legrand’s most recent year.|
|3.||How many units must be sold for Legrand to earn a profit of $25,500?|
|4.||What is the level of sales dollars needed for Legrand to earn operating income of 10% of sales?|
Please help me solve only questions #4. I have looked for references everywhere and cannot figure it out.
|Break even point in units = Fixed costs/(Selling price per unit - variable costs per unit)|
|=(58140)/(3.40-2.55) = 68,400 units|
|Margin of Safety in units = Sales units - break even units|
|Less: Variable Expenses||208,080|
|Less: Fixed Expenses||58,140|
|Units = (Desired Profit + Fixed costs)/Contribution Margin per unit|
|4.Sales Dollars required = Fixed costs/(1-Variable cost% - Desired Profit %)|
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