Question

A company produces a product with variable costs of $2.50 per unit. The product sells for $5.00 per unit. The company has fixed costs of $3,000 and desires a profit of $10,000. The sales level in dollars to achieve the desired profit is $

Answer 1

Answer:

Break-even point (dollars)= $26,000

Explanation:

Giving the following information:

A company produces a product with variable costs of $2.50 per unit. The product sells for $5.00 per unit. The company has fixed costs of $3,000 and desires a profit of $10,000.

To calculate the dollar amount required, we need to use the break-even point in dollars formula and add the desired profit:

Break-even point (dollars)= (fixed costs + desired profit)/ contribution margin ratio

Break-even point (dollars)= (3,000 + 10,000) / [(5 - 2.5)/5]

Break-even point (dollars)= $26,000