The following information was derived from an Income Statement when 20,000 units were sold. Sales $1,250,000...
The following information was derived from an Income Statement when 20,000 units were sold.
| Sales | $1,250,000 |
| Variable Costs | 250,000 |
| Contribution Margin | $1,000,000 |
| Fixed Costs | 400,000 |
| Net Income | $ 600,000 |
Determine the break-even point in units sold.
What is the margin of safety?
How many units must be sold if a Net Income of $800,000 is desired?
Homework Answers
Contribution Margin per unit=$1,000,000/20,000
=$50 per unit
a.Hence breakeven=Fixed Cost/Contribution Margin
=(400,000/50)
=8,000 units.
b.Margin of safety=Total sales-Breakeven sales
=(20,000-8000)
=12,000 units.
c.Target contribution margin=Fixed cost+Target profits
=(400,000+800,000)=$1,200,000
Hence units to be sold=$1,200,000/50
=24,000 units.
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The following information was derived from an Income Statement
when 20,000 units were sold.
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