Answer:
Instructions are below.
Step-by-step explanation:
Giving the following information:
Fixed costs= 4,000 + 10,000= $14,000
Unitary variable cost= $5.5
Selling price= $7.2
To calculate the number of units to be sold to break-even, we need to use the following formula:
Break-even point in units= fixed costs/ contribution margin per unit
Break-even point in units= 14,000 / (7.2 - 5.5)
Break-even point in units= 8,235 units
In dollars:
Break-even point (dollars)= fixed costs/ contribution margin ratio
Break-even point (dollars)= 14,000 / (1.7/7.2)
Break-even point (dollars)= $59,294
Now, imagine the company requires a profit of $50,000:
Break-even point in units= (fixed costs + desired profit) / contribution margin per unit
Break-even point in units= 64,000/1.7
Break-even point in units= 37,647 units
Break-even point (dollars)= (fixed costs + desired profit) / contribution margin ratio
Break-even point (dollars)= 64,000 / (1.7/7.2)
Break-even point (dollars)= $271,059
