28. (TCO 4) The following monthly data are available for RedEx, which produces o

Question

28. (TCO 4) The following monthly data are available for RedEx, which produces only one product that it sells for $84 each. Its unit variable costs are $28, and its total fixed expenses are $64,960. Sales during April totaled 1,600 units.
(a) How much is the break-even point in sales dollars for RedEx?
(b) How many units must RedEx sell in order to earn a profit of $24,640?
(c) A new employee suggests that RedEx sponsor a company softball team as a form of advertising. The cost to sponsor the team is $1,792. How many more units must be sold to cover this cost? (Points : 25)

Explanation / Answer

Hi,

Please find the answer as follows;

Part A:

Break Even Point = Fixed Cost/Contribution Per Unit = 64960/(84 - 28) = 1160 units

Part B:

Sales (Units) = Fixed Cost + Profit/Contribution Per Unit = (64960 + 24640)/(84 - 28) = 1600 Units

Part C:

Additional Sales = 1792/(84 - 28) = 32 Units

Thanks.

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