Question

Flannigan Company manufactures and sells a single product that sells for $450 per unit; variable costs are $300. Annual fixed costs are $870,000. Current sales volume is $4,200,000. Flannigan Company management targets an annual pre-tax income of $1,125,000. Compute the unit sales to earn the target pre-tax net income.
a. 4,333.
b. 7,500.
c. 6,650.
d. 13,300.
e. 11,750.

Answer 1

Answer:

Break-even point in units= 13,300

Explanation:

Giving the following information:

Unitary selling price= $450

Fixed cost= $870,000

Unitary variable cost= $300

Desired profit= $1,125,000

To calculate the units to be sold, we need to use the break-even point with desired profit:

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

Break-even point in units= (870,000 + 1,125,000) / (450 - 300)

Break-even point in units= 13,300