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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

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Homework Answers

Answer #1

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

Answer a.

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

Answer b.

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

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