Sales $300,000 Variable Costs $
Sales $300,000
Variable Costs $180,000
Fixed Expenses $70,000
Units sold 20,000 units
What is the breakeven in units?
How many units must be sold to reach a target profit of $100,000 before taxes?
If sales increased by 5%, by what % would profits increase?
Homework Answers
Selling price per unit = Sales/Units
= 300,000/20,000
= $15
Variable cost per unit = Variable cost/units
= 180,000/20,000
= $9
Contribution margin per unit = Selling price per unit - Variable cost per unit
= 15-9
= $6
Break even point ( in units) = Fixed Expenses/Contribution margin per unit
= 70,000/6
= 11,667 units
Number of units to be sold too earn target profit = ( Fixed Expense + Target profit) / Contribution margin per unit
= ( 70,000+100,000)/6
= 28,334 units
| Sales | 300,000 |
| Variable costs | -180,000 |
| Contribution Margin | 120,000 |
| Fixed expenses | -70,000 |
| Operating Profit | $50,000 |
Operating leverage = Contribution margin/Operating income
= 120,000/50,000
= 2.4
Increase in profit = Operating leverage x Increase in sales
= 2.4 x 5%
= 12%
Kindly comment if you need further assistance. Thanks‼!
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