Finch Corporation produces products that it sells for $21 each. Variable costs per unit are $4,...
Finch Corporation produces products that it sells for $21 each.
Variable costs per unit are $4, and annual fixed costs are
$341,700. Finch desires to earn a profit of $79,900.
Required
-
Use the equation method to determine the break-even point in units and dollars.
-
Determine the sales volume in units and dollars required to earn the desired profit.
Homework Answers
| a. | ||
| At break-even point profit equals to 0 | ||
| Sales = Variable expense + Fixed costs + Profit | ||
| (Units * Selling price ) = ( Units * Variable cost per unit ) + Fixed costs + Profit | ||
| ( Units * 21 ) = ( Units * 4 ) + 341700 + 0 | ||
| 21Units = 4Units + 341700 | ||
| 21Units - 4Units = 341700 | ||
| 17Units = 341700 | ||
| Units = 341700 / 17 | 20100 | |
| Break-even point in units | 20100 | Units |
| Break-even point in dollars = Break-even point in units * Selling price = 20100 * 21 | 422100 | |
| b. | ||
| Sales volume in units required = ( Fixed costs + Desired profit ) / ( Selling price - Variable cost per unit ) = ( 341700 + 79900 ) / ( 21 - 4 ) | 24800 | units |
| Sales volume in dollars required = Sales volume in units required * Selling price per unit = 24800 * 21 | 520800 |
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Q.1
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Variable costs per unit are $9, and annual fixed costs are
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Required
Use the equation method to determine the break-even point in
units and dollars.
Determine the sales volume in units and dollars required to earn
the desired profit.
a. Break-even point in units Break-even point in dollars b. Sales volume in units Sales in dollars
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Is this correct? If not, what are the correct answers?
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Finch Corporation sells products for $42 each that have variable
costs of $9 per unit. Finch’s annual fixed cost is
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Required
Use the per-unit contribution margin approach to determine the
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Break-even point in units Break-even point in dollars
Finch Corporation sells products for $38 each that have variable costs of $9 per unit. Finch's annual fixed cost is $681,500. Required Use the per-unit contribution margin approach to determine the break-even point in units and dollars. Break-even point in units Break-even point in dollars
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