For break even point, we need to calculate the contribution margin per unit first:
Contribution margin per unit = Selling price per unit - Variable cost per unit
Contribution margin per unit = $270 - $105 = $165 per unit
(a) Break even point in sales units = Fixed cost / Contribution margin per unit
Given: Fixed cost = $495000, Contribution margin per unit = $165 (as calculated above)
Putting the values in the above equation, we get,
Break even point in sales units = $495000 / $165 = 3000
So, break even point is 3000 units.
(b) Break even point for target profit of $128700 = Fixed cost + $128700 / Contribution margin per unit
Break even point for target profit of $128700 = $495000 + $128700 / $165
Break even point for target profit of $128700 = $623700 / $165 = 3780
So, break even point for target profit of $128700 is 3780 units.
Target Profit Trailblazer Company sells a product for $270 per unit. The variable cost is $105...
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