Question

1. Break-even sales and sales to realize operating income

   For the current year ended March 31, Cosgrove Company expects fixed costs of $27,600,000, a unit variable cost of $805, and a unit selling price of $1,150.

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

   b. Compute the sales (units) required to realize operating income of $5,175,000.
   units

Answer 1

Ans. A	Break even point in units   =    Total fixed cost / Contribution margin per unit
	$27,600,000 / $345
	80,000    units
Ans. B	Unit sales for target profit   =   (Fixed expense + Target profit) / Contribution margin per unit
	($27,600,000 + $5,175,000) / $345
	$32,775,000 / $345
	95,000    units
	*Working Note:
	Contribution margin per unit = Selling price per unit - Variable cost per unit
	$1,150 - $805
	$345	per unit