High-Low Cost Estimation and Profit Planning Comparative 2007 and 2008 income statements for Dakota Products Inc. follow...
High-Low Cost Estimation and Profit Planning
Comparative 2007 and 2008 income statements for Dakota Products
Inc. follow:
| DAKOTA PRODUCTS INC. Comparative Income Statements For Years Ending December 31, 2007 and 2008 |
||
|---|---|---|
| 2007 | 2008 | |
| Unit sales | 5,000 | 8,000 |
| Sales revenue | $75,000 | $120,000 |
| Expenses | (82,000) | (103,000) |
| Profit (loss) | $(7,000) | $17,000 |
(a) Determine the break-even point in units.
Answer
units
(b) Determine the unit sales volume required to earn a profit of
$7,000.
Answer
Homework Answers
Variable cost per unit = (103000-82000)/(8000-5000) = 7 per unit
Fixed cost = 103000-(8000*7) = 47000
Selling price per unit = 75000/5000 = 15
a) Break even unit = Fixed cost/Contribution margin per unit = 47000/(15-7) = 5875 Units
b) Required unit sales = (47000+7000)/8 = 6750 Units
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