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Because of EDC's massive expansion plan, their fixed costs are expected to skyrocket in the next...

Because of EDC's massive expansion plan, their fixed costs are expected to skyrocket in the next year due to hiring, long-term asset purchases, and so on. The plant manager expects fixed costs to increase to $800,000. They sell desks for $700, and the variable costs for each are $45. Based on this information, your manager asks you to determine the following amounts:

  1. the break-even point in units,
  2. the break-even point in sales dollars, and
  3. the number of units needed to be sold for a profit of $200,000.
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Answer #1

a) Break even Unit = Fixed cost/Contribution margin per unit = 800000/(700-45) = 1221 Units

b) Break even Sales = 1221*700 = $854700

c) Desired unit = (800000+200000)/655 = 1527 Units

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