Question

Only Answer Exercise 2 and 3 please. After completing Exercise 2, What is the number of units needed to achieve the desired profit?

After completing Exercise 3- situation 1, what is the number of units needed to achieve the desired profit?

See circle on the photos below for exercise 2 and 3

Cost-Volume-Profit Analysis Break Even Analysis Break Even is the level of operations where Profit equals zero. EXERCISE 1: Abner Corporation makes a product that sells for $200 per unit. The Variable costs per unit are $120. Fixed Costs total $500,000 each year. Abner currently sells 7,500 units per year. Calculate the number of units that Abner must sell to break even. Use the equation method to solve for the number of units Abner needs to sell to breakeven. If you need help, refer to the examples in the text. Equation Method: Sales Variable Costs Fixed Costs Profit STEP 1 = Set profit to ZERO STEP 2= Solve for N STEP 3= Solve for N STEP 4= Breakeven in UNITS Units In STEP 3 above, solving for N resulted in dividing Fixed Costs by Unit Contribution Margin. Remember, Unit Contribution Margin (UCM) is calculated as follows: Unit Contribution Margin (UCM) - Sales Price per Unit - Variable Cost per Unit So, an easier way to calculate the breakeven point in units is simply use this formula: Fixed Costs | UCM = Breakeven in Units Fixed Costs / UCM = Breakeven in Units S units Breakeven in sales dollars? To get breakeven in sales dollars. you could simply multiply the breakeven in units by the sales price per unit. Or, you can use the Contribution Margin Ratio Contribution Margin Sales - Contribution Margin Ratio What is the Contribution Margin Ratio for Abner? Contribution Margin / Sales CM Ratio s S

Answer 1

Yes, abner should invest in the equipment.