Question

Lindo Company incurs annual fixed costs of $80,000. Variable costs for Lindo’s product are $40 per unit, and the sales price is $64 per unit. Lindo desires to earn an annual profit of $40,000. Required Determine the sales volume in dollars and units required to earn the desired profit. (Do not round intermediate calculations.)

Answer 1

Answer:

Instructions are listed below.

Explanation:

Giving the following information:

Lindo Company incurs annual fixed costs of $80,000. Variable costs for Lindo’s product are $40 per unit, and the sales price is $64 per unit. Lindo desires to earn an annual profit of $40,000.

To calculate the sales in volume and dollars we need to use the break-even formula:

Break-even point (units)= (fixed costs + profit)/ contribution margin

Break-even point (units)= (80,000 + 40,000) / (64 - 40)= 5,000 units

Break-even point (dollars)= (fixed costs + profit)/ contribution margin ratio

Break-even point (dollars)= 120,000 / (24/64)= $320,000