Question

determine the company’s break-even point, the numbers sold to meet the company’s target profit and contribution income statement for both outcomes, ABX Corporation sold 500,000 units at $65/unit. Fixed cost are $12,500,000 per year. Variable costs are $30 per unit. ABX Corporation desires a target profit of $5,500,000 per year.

Answer 1

Break-even point = Fixed costs / ( Selling price per unit - Variable cost per unit ) = 12500000 / ( 65 - 30 )	357143
Number of units sold to meet target profit = ( Target profit + Fixed costs ) / ( Selling price per unit - Variable cost per unit ) = ( 5500000 + 12500000 ) / ( 65 - 30 )	514286

Contribution format income statement at break-even point :
	Total	Per unit
Sales	23214295	65
Variable cost	10714290	30
Contribution margin	12500005	35
Fixed costs	12500000
Profit	5
Contribution format income statement at the target profit point :
	Total	Per unit
Sales	33428590	65
Variable cost	15428580	30
Contribution margin	18000010	35
Fixed costs	12500000
Profit	5500010