Spruce Company is considering the production and sale of a new product with the

Question

Spruce Company is considering the production and sale of a new product with the following sales and cost data: unit sales price, $350; unit variable costs, $180; total fixed costs, $399,500; and projected sales, $910,000. Round your answers to the nearest whole unit or dollar and be sure to label each calculation and show all calculations. Required: (a) Calculate break-even in units. (b) Calculate break-even in dollars (use four decimal places when calculating the contribution margin ratio). (c) Calculate number of units that would need to be sold to generate an after-tax profit of $420,000 assuming a 30% tax rate. (d) Calculate dollar sales that would be needed to generate the same profit as above.

Explanation / Answer

a) break-even in units = 399,500/(350 - 180) = 2350 units b) break-even in dollars = 2350*$350 = 822,500$

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