Caste Windows is a small company that insbals windows. Its cost structure is as

Question

Caste Windows is a small company that insbals windows. Its cost structure is as folkows Seling price from each window installation 650 Varable cost of each window instalstion s600 Annual fxed costs Caculats (a) the breakeven point 185.000 in unts and revenues and (oj the namber of windows Castle Windows must instail and the reverues needed to ean a target operating income of Calculate (a) the breakeven point in units and revenuss Detarmine the formula for the breakeven pont in units, then enter the amounts and eakulate the breakeven point in units Breakeven point in unnts Determine the formula for the breakeven point n revenues, then enter the amounts and caiculats the breakeven peint in revenuES Breakeven point in revenues Calculste (bi the number of windows Caste Windows must nstal and the rev-enues needed to earn s target operating ncome of$160.000 Selest the fomda labels enter the amounts and cacuate the number of windows required to be soils to reach a target operating income of $160.000 Choose trom any Ist or enter any number in the input feids and then comnue to the next questiorn

Explanation / Answer

Selling Price per window installed = $650
Variable Cost per window installed = $600

Contribution Margin per window installed = Selling Price per window installed - Variable Cost per window installed
Contribution Margin per window installed = $650 - $600
Contribution Margin per window installed = $50

Answer a.

Breakeven Point in units = Fixed Costs / Contribution Margin per window installed
Breakeven Point in units = $185,000 / $50
Breakeven Point in units = 3,700

Breakeven Point in revenue = Breakeven Point in units * Selling Price per window installed
Breakeven Point in revenue = 3,700 * $650
Breakeven Point in revenue = $2,405,000

Answer b.

Number of units required to be sold = (Fixed Costs + Target Income) / Contribution Margin per window installed
Number of units required to be sold = ($185,000 + $160,000) / $50
Number of units required to be sold = 6,900

Revenue required to achieve target = Number of units required to be sold * Selling Price per window installed
Revenue required to achieve target = 6,900 * $650
Revenue required to achieve target = $4,485,000

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