Question

Biscuit Company sells its product for $50. In addition, it has a variable cost ratio of...

Biscuit Company sells its product for $50. In addition, it has a variable cost ratio of 55 percent and total fixed costs of $6,875. How many units must be sold in order to obtain a before-tax profit of $12,000?

a.839 units

b.600 units

c.240 units

d.480 units

Biscuit Company sells its product for $50. In addition, it has a variable cost ratio of 45 percent and total fixed costs of $6,875. What is the break-even point in units for Biscuit Company?

a.3,600 units

b.250 units

c.2,400 units

d.375 units

Business   Accounting   
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Homework Answers

Answer #1

Before tax profit = Contribution margin - Fixed expenses.

Assume 'y' is the number of units.

Then, $12,000 = y*($50*45%) - $6,875

$12,000+$6,875 = y22.5

y = $18,875/22.5

y = 839 units

Answer is A.

2.

Break even point in units = Fixed cost / Contribution margin per unit
Break even point in units = $6,875 / ($50*55%)
Break even point in units = 250 Units

Answer is B. 250 units

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