Question

Locus Company has total fixed costs of $117,000. Its product sells for $51 per unit and variable costs amount to $26 per unit. Next year Locus Company wishes to earn a pretax income that equals 50% of fixed costs. How many units must be sold to achieve this target income level

Answer 1

Answer:

Break-even point in units= 7,020 units

Explanation:

Giving the following information:

Fixed costs= $117,000

Selling price= $51

Unitary variable cost= $26

Desired profit= $58,500

To calculate the number of units to be sold, we need to use the following formula:

Break-even point in units= (fixed costs + desired profit)/ contribution margin per unit

Break-even point in units= (117,000 + 58,500) / (51 - 26)

Break-even point in units= 7,020 units