Question

Break-Even Sales and Sales to Realize Income from Operations For the current year ended October 31, Friedman Company expects fixed costs of $14,300,000, a unit variable cost of $250, and a unit selling price of $380. a. Compute the anticipated break-even sales (units). fill in the blank 1 units b. Compute the sales (units) required to realize income from operations of $2,405,000. fill in the blank 2 units

Answer 1

Answer:

Part a

110,000 units

Part b

128,500 units

Explanation:

Break even sales is the level at which a firm makes neither a profit nor a loss.

Break-even (sales) = Fixed Costs ÷ Contribution per unit

where,

Fixed Costs = $14,300,000

Contribution per unit = Sales - Variable Costs

                                     = $380 - $250

                                     = $130

therefore,

Break-even (sales) = $14,300,000 ÷ $130 = 110,000 units

Units to reach Target Profit = (Target Profit + Fixed Costs) ÷ Contribution per unit

                                                = ($2,405,000 + $14,300,000) ÷ $130

                                                = $16,705,000 ÷ $130

                                                = 128,500 units