Question

Moyas corporation sells a single product for $20 per unit. last year, the company's sales revenue was $300,000 and its net operating income was $24,000. if fixed expenses totaled $96,000 for the year, the break-even point in unit sales was

Answer 1

Net operating income was $24000
Fixed expenses=$96000
Sales=$300000
cost per unit=$20
unit sales=$15000 units
CM=$120,000
CM per unit=$8
BE units=FC/CM per unit=96000/8=12,000 units

Answer 2

Answer: The Break Even Point in units is 12,000 units.

We follow these steps in order to arrive at the answer:

First we find Total variable costs of Moyas Corporation

$Net Operating Income = Sales - Variable Costs - Fixed Costs$

$24000 = 300000 - Variable Costs - 96000$

$\mathbf{Variable Costs = 300000 - 96000 - 24000 = 180000}$

Next we find the number of units sold:

$No.of units sold = \frac{Total Sales}{Selling price per unit}$

$\mathbf{No.of units sold = \frac{300000}{20} = 15,000}$

Then we find Variable Cost per unit

$Variable cost per unit = \frac{Total Variable Cost}{Number of units sold}$

$\mathbf{Variable cost per unit = \frac{180000}{15000} = 12}$

We calculate Contribution Margin per unit next

$Contribution Margin per unit = Selling price per unit - Variable costs per unit$

$\mathbf{Contribution Margin per unit = 20-12 = 8}$

Finally we calculate Break Even Point (BEP) in units as:

$BEP = \frac{Fixed Costs}{Contribution Margin per unit}$

$\textbf{BEP_{units} = \frac{96,000}{8} = 12,000 units}$