Question

# Scrushy Company sells a product for \$150 per unit. The variable cost is \$110 per unit,...

Scrushy Company sells a product for \$150 per unit. The variable cost is \$110 per unit, and fixed costs are \$200,000.

Determine (a) the break-even point in sales units and (b) the break-even point in sales units if the company desires a target profit of \$50,000.

 a. Break-even point in sales units b. Break-even point in sales units if the company desires a target profit of \$50,000

Contribution margin per unit = Selling price - Variable cost = \$150 - \$110 = \$40

(a) Break-even point in sales units = Fixed costs / Contribution margin per unit

Break-even point in sales units = \$200,000 / \$40

Break-even point in sales units = 5,000 units

(b) Break-even point in sales units if the company desires a target profit of \$50,000 = (Fixed costs + Target profit) / Contribution margin per unit

Break-even point in sales units if the company desires a target profit of \$50,000 = (\$200,000 + \$50,000) / \$40

Break-even point in sales units if the company desires a target profit of \$50,000 = 6,250 units