Campground Inc. is considering the production and sale of propane lamps. Expecte
ID: 2493221 • Letter: C
Question
Campground Inc. is considering the production and sale of propane lamps. Expected annual fixed costs are expected to total $ 50,000.00 Sale Price per lamp $ 12.00 Variable cost per lamp $ 4.50 Calculate (a) the breakeven point in units (b) the breakeven point in dollars (c) the number of lamps that must be sold to earn a profit of $120,000 (d) the operating income or loss at a sales volume of 16,000 lamps Campground Inc. is considering the production and sale of propane lamps. Expected annual fixed costs are expected to total $ 50,000.00 Sale Price per lamp $ 12.00 Variable cost per lamp $ 4.50 Calculate (a) the breakeven point in units (b) the breakeven point in dollars (c) the number of lamps that must be sold to earn a profit of $120,000 (d) the operating income or loss at a sales volume of 16,000 lampsExplanation / Answer
Answer to part (a)
Break Even point in units = Fixed cost / Contribution margin per unit
Contribution margin per unit = Sales per unit – Variable cost per unit
Contribution margin per unit = 12 -4.5 = $ 7.5
Fixed Cost = $ 50,000
Break Even point in units = 50000/ 7.5
Break Even Point in units = 6666.67 or 6667 units
Answer to Pat (b)
Break Even Point in dollars = Break even units * Sale Price per unit
Break Even Point in dollars = 6667 * 12 = $ 80,004
Answer to Part (c)
Let the units be sold as “x” to earn a profit of $ 120,000
Sales= Fixed Cost + Variable Cost + Profit
12x = 50,000 + 4.5x + 120,000
7.5x = 170,000
X = 22,666.67 or 22,667
The number of units are 22,667
Answer to Part (d)
Sales = 16,000 lamps
Sales (in $ ) = 192,000
Less : Variable Cost = 72,000
Contribution Margin = 120,000
Less: Fixed Cost = 50,000
Net Income = 70,000
The Net Income is $ 70,000 at the sales units of 16,000 lamps
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