Question

Target Profit

Outdoors Company sells a product for $245 per unit. The variable cost is $85 per unit, and fixed costs are $1,184,000.

Determine (a) the break-even point in sales units and (b) the sales units required for the company to achieve a target profit of $355,200.

a. Break-even point in sales units |
units | |

b. Break-even point in sales units required
for the company to achieve a target profit of $355,200 |
units |

Answer #1

(a) Break even point (units) = fixed cost / contribution margin (selling price - variable cost)

= $1,184,000 / ($245 - $85) = $1,184,000 / $160 = 7400 units

(b) In order to achieve a profit of $355,200 we need a contribution of = fixed cost + target profit = $355,200 + $1,184,000 = $1,539,200

Contribution per unit = $160

Therefore, unit sales to achieve the required profit = total required contribution / contribution margin per unit = $1,539,200 / $160 = 9620 units

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b. Break-even point in sales units required
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Determine:
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Determine:
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b. Break-even point if the selling price were
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Determine the following: Round answers to the nearest whole
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units
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