Question

Target Profit Forest Company sells a product for $250 per unit. The variable cost is $100...

Target Profit

Forest Company sells a product for $250 per unit. The variable cost is $100 per unit, and fixed costs are $615,000.

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 $239,850.

a. Break-even point in sales units units
b. Break-even point in sales units if the company desires a target profit of $239,850 units
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Homework Answers

Answer #1

(a) The break-even point in sales units and

Selling price (A)

250

100.0%

Less: Variable cost (B)

100

40.0%

Contribution margin per unit(C=A-B)

150

60.0%

Break even point in unit sales

=Fixed cost / Contribution margin per unit

=$615,000 /150

=4100 units

The break-even point in sales units a= 4,100 units

(b) The break-even point in sales units if the company desires a target profit of $239,850.

Sales required for target profit of $239,850.

=(Desired profit Fixed cost) / Contribution margi

=(239,850+615,000) /150

=5,699

The break-even point in sales units if the company desires a target profit of $239,850. =5,699 units

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