Question

Fern Corporation manufacturers a single product that has a selling price of $25.00 per unit. Fixed expenses total $33,000 per year, and the company must sell 5,500 units to break even. If the company has a target profit of $12,000, sales in units must be:

Answer 1

Answer:

7,500 units

Explanation:

Given that,

Selling price = $25 per unit

Fixed expenses = $33,000 per year

Break even units sell = 5,500 units

Target profit = $12,000

Total break- even sale in Dollar:

= Selling price × Break even units sell

= $25 × 5,500 units

= $137,500

Break- even Point = Fixed Costs ÷ Contribution Margin per Unit

Therefore,

Contribution Margin per unit:

= Fixed Costs ÷ Break-Even points

= $33,000 ÷ $137,500

= 0.24 per unit

Sales amount:

= (Fixed costs + Target profit) ÷ Contribution margin per unit

= ($33,000 + $12,000) ÷ 0.24

= $187,500

Sales in units = Sales in amount ÷ Selling price per unit

                      = $187,500 ÷ $25

                      = 7,500 units