Answer:
Break-even point in units= 7,750 units
Explanation:
Giving the following information:
Selling price= $20.00 per unit.
Fixed expenses total $48,000 per year
The company must sell 6,000 units to break even.
Desired profit= $14,000
First, we need to calculate the unitary contribution margin:
Break-even point in units= fixed costs/ contribution margin per unit
6,000= 48,000/ (20 - X)
120,000 - 6,000X= 48,000
12= unitary variable cost
Unitary contribution margin= (20 - 12)= 8
Now, we need to incorporate to the break-even point formula the desired profit:
Break-even point in units= (fixed costs + desired profit)/ contribution margin per unit
Break-even point in units= (48,000 + 14,000)/8
Break-even point in units= 7,750 units
Answer:
7750 units
Explanation:
The BEP which is the break even point is the point where the company's sales or revenue generated is equal to the cost incurred. As such, the BEP is the number of units that must be sold for the company to make neither a profit nor a loss.
Both sales and variable cost are dependent on the number of units sold.
The sales less the variable cost gives the contribution margin. The contribution margin less the fixed cost gives the net operating income.
As such, the net operating income/loss is the difference between the sales and the total costs.
Let the variable cost per unit be v
20 * 6000 - 6000v = 48000
120,000 - 48,000 = 6000v
6,000v = 72,000
v = $12
To achieve a set profit of $14,000, let the sales in unit be u
u(20 - 12) - 48,000 = 14,000
8u = 62,000
u = 62,000/8
= 7750 units
