Question

Ferkil Corporation manufacturers a single product that has a selling price of $100 per unit. Fixed expenses total $225,000 per year, and the company must sell 5,000 units to break even.
If the company has a target profit of $67,500, sales in units must be:


Multiple Choice


a.6,000 units


b.5,750 units


c.7,925 units


d.6,500 units

Answer 1

Answer:

d)= 6,500

Explanation:

The break-even point (BEP) is the units of  the product that Ferkil Corporation must sell for it to make no profit or loss.

This units can be determined as follows:

BEP = Total fixed cost + target profit/ selling price - variable cost

So we substitute the variables given into the formula

5000 = 225,000 /(100-X)

5000×(100-X) =225,000

500,000 -5000x = 225,000

(500,000 -225,000)/5000 = x

X= 55

variable cost per unit = $55

Units to sell to achieve a profit 67,500

= (225,000  + 67,500)/(100-55)

= 6,500