Question

Currently, the selling price per unit of product x is $320. The variable cost per unit is $270 and the total fixed costs are places, e.g.5,275.) 609 000 the company required a net profit of $35,000 ho many units would need to be sold? Calculate the following: 

Answer 1

Solution:-

1. The contribution margin per unit:-

Contribution margin per unit

$50

Explanation:-

Selling price per unit	$320
Less:- Variable cost per unit	$270
= Contribution margin per unit	$50

2. The number of units to be sold to break-even:-

Number of units to be sold to break-even

12,180

Explanation:-

Total fixed cost	$609,000
Divide by Contribution margin per unit	$50
= Number of unit to be sold to break-even	12,180

3. The total sales achieved at break-even:-

Total sales achieved at break-even

Explanation:-

Number of unit to be sold to break-even	12,180
Multiply by selling price per unit	$320
= Total sales achieved at break-even	3,897,600

4. The break-even in units required to make $35,000 net profit:-

Break-even in units required to make $35,000 net profit

12,880

Explanation:-

Total fixed cost	$609,000
Add:- Required net profit	$35,000
= Total Contribution margin	$644,000
Divide by contribution margin per unit	$50
Break-even in units required to make $35,000 net profit	12,880

Using the above information, a proposal is being evaluated to increase the unit selling price to $350

5. The number of units to be sold to break-even based on the new selling price:-

Number of units to be sold to break-even based on the new selling price

Explanation:-

Total fixed cost	$609,000
Divide by Contribution margin per unit	$80
= Number of units to be sold to break-even based on the new selling price	7,613

6. The total sales achieved at the new selling price to break-even:-

Total sales achieved at break-even

2,664,550

Explanation:-

Number of unit to be sold to break-even	7,613
Multiply by selling price per unit	$350
= Total sales achieved at break-even	2,664,550

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