Cutlass company\'s projected profit for the coming year is as follows Total Per
ID: 2482040 • Letter: C
Question
Cutlass company's projected profit for the coming year is as follows
Total Per Unit
Sales 200,000 20
Total variable cost 120,000 12
Contribution margin 80,000 8
Total fixed cost 64,000
Operating income 16,000
Required
a. Compute the break even point in units
b. Compute the break even point in sales dollars
c. How many units must be sold to earn a profit of 30,000?
Explanation / Answer
Solution:
a) Break Even Point in Units = total Fixed Cost / Contribution Margin Per Unit = $64,000 / $8 = 8,000 Units
b) Break Even Point in Sales dollars = Break Even Point in Units x selling price per unit = 8,000 Units x $20 = $160,000
c) Numbe of Units must be sold to earn a profit of $30,000 = (Total Fixed Cost + Desired Profit) / Contribution Margin Per Unit
= ($64,000 + $30,000) / $8
= 11,750 Units
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