Question

Sales price per unit Total Fixed Costs Variable cost per unit $45 $1,500,00 0 $30 How many units does the company have to sell to break even? How much of sales dollar does the company have to make to break even? The company targets to make $500,000 in profit. How many units does the company have to sell to make this target? (round to the nearest integer) Assume that the income tax rate is 20%. How many units does the company have to sell to achieve the $500,000 targeted profit after tax? (round to the nearest integer)

Answer 1

Answers: BEP in units Q1. Working Note: Particulars Sales Price per unit Less: Variable Cost per unit Contribution Margin 45 Amount $ $ $ Fixed Cost / Contribution Margin $1,500,000 / $15 100,000 30 15 Fixed Cost 1,500,000 Q2. BEP in dollars Fixed Cost / Contribution Margin Ratio $1,500,000 / 33.33% $ 4,500,000 Contribution Margin $ 15 Contribution Margin Ratio ($15/45] 33.33% Q3. Units to be sold= (Fixed Cost + Profit) / Contribution Margin ($1,500,000 + $500,000) / $15 133,333 Q4. Units to be sold= (Fixed Cost + [Profit/100-20%]) / Contribution Margin ($1,500,000 + ($500,000/80%]) / $15 ($1,500,000 + $625,000) / $15 141,667

Workout: Q1 & Q2. Particulars Sales Price per unit Less: Variable Cost per unit Contribution Margin Less: Fixed Cost Profit Per Unit $ 45 S 30 $ 15 Units Amount 100,000 $ 4,500,000 100,000$ 3,000,000 100,000 $ 1,500,000 $ 1,500,000 $ Q3. Particulars Per Unit Sales Price per unit $ 45 Less: Variable Cost per unit $ 30 Contribution Margin $ 15 Less: Fixed Cost Profit Units Amount 133,333 $ 6,000,000 133,333$ 4,000,000 133,333 $ 2,000,000 $ 1,500,000 $ 500,000 Q4. Particulars Per Unit Sales Price per unit $ 45 Less: Variable Cost per unit $ 30 Contribution Margin $ 15 Less: Fixed Cost Profit before tax Less: Income Tax 20% Desired Profit Units Amount 141,667 $ 6,375,000 141,667 $ 4,250,000 141,667 $ 2,125,000 $ 1,500,000 $ 625,000 $ 125,000 $ 500,000

-------------------------------------------

If you have any queries/doubts,Immediately drop your messages in the comment box !!!! I will help you...
Thanks!!!