Question

Preppy Co. makes and sells a single product. The current selling price is $30 per unit. Variable costs are $21 per unit, and fixed expenses total $90,000 per month. Sales volume for July totaled 12,000 units.

Required:
a. Calculate the operating income for July.
b. Calculate the break-even point in units sold and total revenues.

Answer 1

Answer and Explanation:

The computation is shown below:

(a)  

Sales = 30 × 12,000 units = $360,000

(Less) variable costs = 21 × 12,000 units = $252,000

(Less) fixed costs = $90,000

Operating income = $18,000

(b)  

Break even point in units be X

X × 30 = X × 21 + $90,000

9X = $90,000

X = 10,000 units

Now  

Break even point in dollars is

= 10,000 × $30

= $300,000