Question

Fowler Company produces a product that sells for $200 per unit and has a variable cost of $125 per unit. Fowler incurs annual fixed costs of $450,000 Required a. Determine the sales volume in units and dollars required to break even. (Do not round intermediate calculations.) b. Calculate the break-even point assuming fixed costs increase to $600,000. (Do not round intermediate calculations.) Answer is not complete. 6,000 $ 1,200,000 Sales volume in units Sales in dollars Break-even units Break-even sales b

Answer 1

1)a) sales in dollars break even = fixed expenses/ contribution margin ratio

Contribution margin ratio = contribution per unit/selling price per unit×100

Contribution per unit == selling price - variable expenses per unit

= $200 - $125 = $75

Contribution margin ratio = $75/$200×100 = 37.5%

Break even sales in dollars = $450000/37.5% = $1200000

Break even point in unit's = $1200000/$200 = 6000 units

b) break even in dollars = $600000/$37.5% = $1600000

Break even units = $1600000/$200 = 8000 units

2) a) contribution margin ratio = contribution per unit/selling price

contribution per unit = selling price - variable expenses per unit

= $45 - $25 = $20

break even sales = fixed expenses/contribution margin per unit

= $800000/$20 = 40000 units

b) unit to attain target profit = $120000+$800000/$20

= 46000 units

c) let the unit sold be ' y'

Contribution margin per unit × y - fixed expenses = target profit

Contribution margin per unit = selling price - variable expenses per unit

= $40 - $25 = $15

Target= $15×y - $800000

$160000 = 15y - $800000

$160000+$800000/$15 = y

y = $960000/$15= 64000 unit's

64000 units to be sold to attain target profit

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