Not understanding where the 38 and 30 comes from in part c where they set the eq

Question

Not understanding where the 38 and 30 comes from in part c where they set the equation up as (50-38)X-22,000=(50-30)x-340,000

Please explain

Thompson Company is considering the development of two products: no. 65 or no. 66 Manufacturing cost information follows. No. 65 $220,000 No. 66 $340,000 Annual fixed costs Variable cost per unit 25 Regardless of which product is introduced, the anticipated seling price will be S50 and the company will pay a 10% sales commission on gross dollar sales. Thompson will not carry an inventory of these items Required: A. What is the break-even sales volume (in dollars) on product no. 66? B. Which of the two products will be more profitable at a sales level of 25,000 units? C. At what unit-volume level will the profit/loss on product no. 65 equal the profit/loss on product no. 66? LO: 1, 4 Type: A Answer: S50 30 $20 A. Selling price Less: Variable cost [$25+ ($50 x 1096)] Unit contribution margin Break-even units: $340,000 ÷ $20 = 17,000 Break-even sales: 17,000 x $50 = $850,000 No. 65 950,000 220,000 No. 66 Sales Less: Variable costs* Contribution margiin Less: Fixed costs Operating income S1,250,000 S1,250,000 750,000 S 300,000 S500,000 340,000 S 80,000 S 160,000 *25,000 x $50 **No. 65: 25.000 x [S33t ($50 x 109.0): No. 66: 25.000 x [S25+ ($50 x 1000)] Product no. 66 is more profitable: $160,000 vs. $80,000 C. X Number of units (S50 - S38)X - $220,000 (S50 - S30)X - S340,000 S12X - S220,000 $20X - $340,000 $85 = $120,000 X = 15,000 units

Explanation / Answer

Req A: No. 65 No.66 Total variable cost Variable cost 33 25 Sales commission(10% of selling price) 5 5 Total variable cost 38 30 Selling price 50 50 Contribution margin per unit 12 20 CM ratio 24% 40% (Contribution/ Sales*100) Fixed cost 220,000 340,000 Break even sales in $ 916666.7 850000 (Fixed Cost/ CM ratio) Break even sales in $: $ 850,000 Req B: No. 65 No.66 Sales units 25000 25000 Contribution margin per unit 12 20 Contribution 300000 500000 Less: Fixed cost 220,000 340,000 Net income 80,000 160,000 Product No. 66 is more profitable Req c: Indifference point among products; Change in fixed cost / Change in Variable cosst per unit (340,000-220,000) / (38-30) =15,000 units

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