Question

Break-even sales and sales to realize operating income For the current year ended March 31, Cosgrove Company expects fixed costs of $492,800, a unit variable cost of $44, and a unit selling price of $66. a. Compute the anticipated break-even sales (units). units b. Compute the sales (units) required to realize operating income of $114,400. units

Answer 1

Answer:

a. 22,400 units

b. 27,600 units

Explanation:

Break even point is the level of Activity where a firm neither makes a profit nor a loss.

Break -even (units) = Fixed Costs / Contribution per unit

Contribution per unit

Contribution per unit = Sales per unit less Variable Cost per unit

                                   = $66 - $44

                                   = $22

Break -even (units) =  $492,800 / $22

                                =  22,400 units

Sales units to reach a target profit = (Target Profit + Fixed Costs) / Contribution per unit

                                                        = ($114,400 + $492,800) / $22

                                                        = $607,200 / $22

                                                        = 27,600 units