Answer:
Beta must sell 11,180 wrist watches to earn an operating income of $92,700.
Explanation:
Break-even point is the level of sale at which the company is in No Profit and No loss position. It shows that the company has earned enough contribution which covers all the fixed cost of the business.
Selling Price = $75 per unit
Variable cost = $60 per unit
Contribution = Selling Price - Variable cost
Contribution = $75 - $60
Contribution = $15 per unit
Fixed Cost = ?
We can calculate Fixed cost using following formula
Break-even point = Fixed Cost / Contribution per unit
5,000 = Fixed Cost / $15
Fixed Cost = 5,000 x 15 = $75,000
Desired Income = $92,700
We can calculate the sales volume required to earn desired Income of $92,700 by using following formula
Sales Volume = ( Fixed Cost + Desired Profit ) / Contribution per unit
Sales Volume = ( $75,000 + $92,700 ) / $15
Sales Volume = $167,700 / $15
Sales Volume = 11,180 Wrist watches
