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 breakeven 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.)
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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