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3 years ago

PB4.

Business

1 answer:

julia-pushkina [17]3 years ago

6 0

Answer:

The question is incomplete, the complete question is given below.

Sales price 150

Variable cost 80

Fixed expenses 42,000

Answer:

Break-even point (in units) = 600 units
Break-even point (sales) = $90,000
Contribution margin ratio = 46.6%
Units to be sold to achieve a profit of $21,000 :900 units
Contribution margin income statement (see below)

West Island

Contribution margin income statement

Sales ( $150 900) 135,000

less variable costs($80 × 900) ( 72,000)

Contribution 63,000

Less fixed cost (42,000)

Profit 21,000

Explanation:

Break-even point is the level of activity where a business makes no profit or loss. The number of units to be produced which equates the total cost to total revenue.

It is calculated as ;

Break-even point (in units)=Total general fixed cost/ (selling price per - Variable cost)

Break-even point (sales) = Break-even point (units)× units price

So for West Island, we do as follows:

Break-even point (in units) = $42,000/$(150-80)= 600 units

Break-even point (sales) = 600 × $150 = $90,000

Contribution margin ratio(C.M.R) is the proportion of sales made as contribution. It is determined as contribution/sales revenue.

To calculate the total contribution at the break-even, we just multiply the contribution per unit by the break-even point (units)

Contribution at the break-even point= (150-80) × 600=$42,000

Contribution margin ratio = 42,000/(600*150)= 46.6%

Units to be sold to achieve target profit= (Fixed cost + target profit)/ (S.P- V.C)

Therefore to earn a profit of $21,000., West Island will have to sell:

$(42,000 + 21,000)/$(150-80) = 900 units

West Island

Contribution margin income statement

Sales ( $150 900) 135,000

less variable costs($80 × 900) ( 72,000)

Contribution 63,000

Less fixed cost (42,000)

Profit 21,000

This confirms our answer !

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