Question

Vernon Corporation produces products that it sells for $19 each. Variable costs per unit are $9, and annual fixed costs are $206,000. Vernon desires to earn a profit of $41,000. Required a. Use the equation method to determine the break-even point in units and dollars. b. Determine the sales volume in units and dollars required to earn the desired profit. Answer is complete but not entirely correct. a. Break-even point in units Break-even point in dollars Sales volume in units Sales in dollars 20,600 $ 469,300 24,700 $ 24,700

Answer 1

	Sales price per unit	$19
	Variable costs per unit	$9
	Contribution margin per unit	$10
	Contribution margin ratio	47.37%
	Fixed costs	$2,06,000
a	Break even point in units(Fixed costs/CM per unit)	20600	units
	Break even point in dollars(20,600*$19)	$3,91,400
b	Target Profit	$41,000
	Add:Fixed costs	$2,06,000
	Target Contribution margin	$2,47,000
	Sales volume required($247,000/$10)	24700	units
	Sales in dollars(24,700 units*$19)	$4,69,300