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:

Answer 1

Answer:

Break-even point in units= 6,500 units

Explanation:

Giving the following information:

Selling price per unit= $100

Fixed expenses total $225,000 per year

Break-even point= 5,000

Desired profit= $67,500

First, we need to calculate the contribution margin per unit:

Break-even point in units= fixed costs/ contribution margin per unit

5,000= 225,000 / contribution margin per unit

contribution margin per unit= 225,000/5,000

contribution margin per unit= $45

Now, we can determine the number of units to be sold:

Break-even point in units= (fixed costs + desired profit) / contribution margin per unit

Break-even point in units= (225,000 + 67,500) / 45

Break-even point in units= 6,500 units