Question

Halifax Products sells a product for $108. Variable costs per
unit are $55, and monthly fixed costs are $111,300.

**a.** What is the break-even point in
units?

**b.** How many units would need to be sold to earn a
target profit of $206,700?

**c.** Assuming they achieve the level of sales
required in part b, what is the margin of safety in sales
dollars?

Answer #1

Sales Price | $108 | ||||

Variable Cost | $55 | ||||

Contribution | $53 | ||||

Fixed Cost | $111,300 | ||||

a | Break-Even Point | 111300/53 | |||

Break-Even
Point |
2100 |
Units |
|||

b | Units required for profit of $206700 | ||||

Units | (206700+111300)/53 | ||||

Units |
6000 |
||||

c | Sales at 6000 Units | 6000*108 | |||

Sales at 6000 Units | $ 648,000 | ||||

Sales at Break-Even | 2100*108 | ||||

Sales at Break-Even | $ 226,800 | ||||

Margin of Safety | Actual Sales - Break-Even Sales | ||||

648000-226800 | |||||

Margin of Safety | $ 421,200 |

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