Answer:
Break-even point in units= 8,000 units
Instructions are below.
Explanation:
Giving the following information:
Selling price= $25
Fixed expenses= $65,000 per year
Break-even point= 6,500 units
Desired profit= $15,000
First, we need to calculate the unitary contribution margin:
Break-even point in units= fixed costs/ contribution margin per unit
6,500= 65,000/ (25 - X)
162,500 - 6,500X= 65,000
15= unitary variable cost
Unitary contribution margin= (25 - 15)= 10
Now, we need to incorporate to the break-even point formula the desired profit:
Break-even point in units= (fixed costs + desired profit)/ contribution margin per unit
Break-even point in units= (65,000 + 15,000)/10
Break-even point in units= 8,000 units
<u>To prove it:</u>
Sales= (8,000*25)= 200,000
Total variable cost= (8,000*15)= (120,000)
Contribution margin= 80,000
Fixed costs= (65,000)
Net operation income= 15,000
