Question

Break-Even Sales and Sales to Realize Income from Operations

For the current year ending October 31, Yentling Company expects fixed costs of $429,000, a unit variable cost of $45, and a unit selling price of $67.

a. Compute the anticipated break-even sales (units).
units

b. Compute the sales (units) required to realize income from operations of $99,000.
units

Answer 1

a. Calculation of Break even point is as follows:

Break even point (units) = Fixed cost / Contribution margin per unit

= $ 429,000 / $ 22

= 19,500 units

Thus, Break even sales is 19,500 units

Working note:

Contribution margin per unit = Selling price per unit - Variable expenses per unit

= $ 67 - $ 45

= $ 22 per unit

b. Calculation of sales units must be sold to realize income from operations of $ 99,000 is as follows:

Sales units required to earn profit = ( Fixed Cost + Target profit ) / Contribution Margin per unit

= ( $ 429,000 + $ 99,000 ) / $ 22

= $ 528,000 / $ 22

= 24,000 units

Thus, Sales of 24,000 units to be made to earn profit of $ 99,000