Answer:
The break-even point in units and dollars is 24,000 units and $960,000 respectively.
The sales volume in units and dollars required to earn the desired profit is 34,000 units and $1,360,000 respectively.
Explanation:
The formula to compute the break even point in units and dollars is shown below:
Break even point in units = (Fixed expenses ) ÷ (Contribution margin per unit)
where,
Contribution margin per unit = Selling price per unit - Variable expense per unit
= $40 - $25
= $15
And, the fixed expenses is $360,000
Now put these values to the above formula
So, the value would equal to
= $360,000 ÷ $15
= 24,000 units
Break even point in dollars = (Fixed expenses) ÷ (Profit volume Ratio)
where Profit volume ratio = (Contribution margin per unit) ÷ (selling price per unit) × 100
So, the Profit volume ratio = ($15) ÷ ($40) × 100 = 37.50%
And, the fixed expenses is $360,000
Now put these values to the above formula
So, the value would equal to
= $360,000 ÷ 37.50%
= $960,000
For desired profits
Sales volume in units = (Fixed expenses + desired profit ) ÷ (Contribution margin per unit)
= ($360,000 + $150,000)÷ $15
= 34,000 units
Sales volume in dollars = (Fixed expenses + desired profit ) ÷ (Profit volume ratio)
= ($360,000 + $150,000) ÷ 37.50%
= $1,360,000
