Organic Oranges Bag Company has the following figures for August 2020: Bags sold: 40,000 Price per...
Organic Oranges Bag Company has the following figures for August 2020: Bags sold: 40,000 Price per bag: $10 Variable cost per bag: $4 Fixed cost: $120,000 (1) Calculate the breakeven number in units for August. (2) How many bags does the firm need to sell in September to make a target profit of $150,000? Please show all work for the problem.
Homework Answers
Contribution margin=Sales-Variable cost
=(10-4)=$6 per bag
a.Breakeven=Fixed expenses/Contribution margin
=120,000/6
=20,000 bags
b.Target contribution margin=Fixed cost+Target profits
=(120,000+150,000)=$270,000
Hence bags to be sold=Target contribution margin/contribution margin per unit
=270,000/6
=45,000 bags
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