Question

# Break-even sales and sales to realize operating income For the current year ended March 31, Cosgrove...

Break-even sales and sales to realize operating income

For the current year ended March 31, Cosgrove Company expects fixed costs of \$540,000, a unit variable cost of \$51, and a unit selling price of \$76.

a. Compute the anticipated break-even sales (units).
units

b. Compute the sales (units) required to realize operating income of \$125,000.
units

Contribution margin per unit = Selling price per unit - Variable cost per unit
Contribution margin per unit = \$76 - \$51
Contribution margin per unit = \$25

Breakeven sales (units) = Fixed costs / Contribution margin per unit
Breakeven sales (units) = \$540,000 / \$25
Breakeven sales (units) = 21,600

Required sales (units) = (Fixed costs + Target operating income) / Contribution margin per unit
Required sales (units) = (\$540,000 + \$125,000) / \$25
Required sales (units) = \$665,000 / \$25
Required sales (units) = 26,600