Jacko company makes playground equipment and tree houses for children. For playg

Question

Jacko company makes playground equipment and tree houses for children. For playground equipment, the price is $500 and variable expenses are 350$ per unit. For tree houses, the price is 200 $ and variable expense is 80$. Total fixed expenses are 820,000$.  Last year jack sold 4000 playground equipment and 10,000 tree houses.

How many playground equipments did jack sell at breakeven?

How many tree houses did jack sell at break even?

What is jacko companies revenue at breakeven?

If jacko company wanted to achieve and after tax income of 100,000 and their tax rate was 30%, what would be their break even unit sales required to achieve this target profit ?

Explanation / Answer

Hi,

Please find the answers as follows:

Part 1:

Fixed Cost for Playground Equipment = 820000*2000000/4000000 = 410000 (Fixed Cost apportioned on the basis of sales value)

Break Even = 410000/(500 - 350) = 2733.33 or 2733 units

Part 2:

Break Even (Playground Equipment) = Fixed Cost/Contribution Per Unit

Fixed Cost for Playground Equipment = 820000*2000000/4000000 = 410000 (Fixed Cost apportioned on the basis of sales value)

Break Even = 410000/(200 - 80) = 3416.67 or 3417 units

Part 3:

Revenue at Break Even = 2733* 500 + 3417*200 = 204990

Part 4

Sales = Fixed Cost + Desired Profit/Total Contribution = (820000 + 100000)/135 = 6814.82 or 6815 units

Thanks.

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