Mottle Inc. fixed costs are expected to be $70,000 and variable costs are expected to be...
Mottle Inc. fixed costs are expected to be $70,000 and variable costs are expected to be $20 per product. Sales price is $40 per product and targeted net income is $300,000.
- Determine the required sales in units to break even.
- Determine the required sales in dollars to break even.
- Determine the required sales in units to achieve targeted net income of $300,000.
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Homework Answers
Contribution margin per unit = Selling price per unit - Variable cost per unit
= $40 - $20
= $20
a. Breakeven point in units = Fixed cost / Contribution margin per unit
= $70,000 / $20
= 3,500 units
b. Breakeven point in dollars = (Fixed cost / Contribution margin per unit) X Selling price per unit
= ($70,000 / $20) X $40
= $140,000
c. Target sales = [(Fixed cost + Target profit) / Contribution margin per unit] X Selling price per unit
= [($70,000 + $300,000) / $20] X $40
= $740,000
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