Selling price per case $88 Variable cost per case $48 Fixed costs per year associated with...
Selling price per case $88
Variable cost per case $48
Fixed costs per year associated with this product $13,040,000
Income Tax rate 40%
1. Compute break even point in units per year
2. How many cases must sell to earn $1,956,000?
Homework Answers
1.
Break even point in units = Fixed cost / Contribution per unit
Break even point in units = $13,040,000 / $88-48
Break even point in units = $13,040,000 / $40 = 326,000 units
2.
Cases to sell to earn $1,956,000
Desired sales units = Fixed cost + Target profit before tax / Contribution per unit
Desired sales units = $13,040,000 + (1,956,000 / 60%) / $40
Desired sales units = $13,040,000 + 3,260,000 / $40
Desired sales units = 407,500 units
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