Question

The Hartnett Corporation manufactures baseball bats with Pudge Rodriguez’s autograph stamped on them. Each bat sells for $13 and has a variable cost of $8. There are $20,000 in fixed costs involved in the production process.

a. Compute the break-even point in units.
  

b. Find the sales (in units) needed to earn a profit of $15,000.

Answer 1

a. Break Even Point in Units = Fixed Cost / ( Sales Per Unit - Variable Cost Per Unit )

= $20,000 / ( $ 13 - $ 8)

= 4,000 Units

Hence the correct answer is 4,000 Units

b. Profit = $ 15,000

Add: Fixed Cost = $ 20,000

Total Contribution Required = $ 35,000

Contribution Per Unit = Sales Per Unit - Variable Cost Per Unit

= $ 13 - $ 8

=$ 5

The  sales (in units) needed to earn a profit of $15,000 = Total Contribution Required / Contribution Per Unit

= $ 35,000 / $ 5

= 7,000

Hence the correct answer is 7,000 Units