Question

# Harmony sells a product for \$50 per unit. Variable costs per unit are \$18, and monthly...

Harmony sells a product for \$50 per unit. Variable costs per unit are \$18, and monthly fixed costs are \$252,800. a. What is the break-even point in units? b. What unit sales would be required to earn a target profit of \$198,400? c. Assume they achieve the level of sales required in part b, what is the degree of operating leverage? (Round your answer to 2 decimal place.) d. If sales increase by 40% from that level, by what percentage will profits increase? (Round final answers to two decimal places.)

• Requirements
 A Sale price per unit \$50 B Variable cost per unit \$18 C = A - B Contribution margin per unit \$32 D Fixed Cost \$252,800 E = D/C Break even in units 7900 Answer [a]

 A Target profits \$198,400 B Fixed Cost \$252,800 C = A+B Total contribution margin \$451,200 D Contribution margin per unit \$32 E = C/D Units required to attain target profits 14100 Answer [b] F = C/A Degree of operating leverage 2.27 Answer [c] G Increase in sale % 40% H = F x G Profit will increase by % 90.80% Answer [d]

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