Trident Food Corporation generated the following income statement for the most r

Question

Trident Food Corporation generated the following income statement for the most recent fiscal year, which ended December 31, 2010:

Sales revenues

$150,000

Variable cost of sales

(112,500)

Gross profit

37,500

Fixed operating costs

  (24,000)

Net operating income (EBIT)

13,500

Interest

  (10,000)

Earnings before taxes

3,500

Taxes (40%)

    (1,400)

Net income

2,100

Each item of inventory Trident Foods produces has a selling price of $20.

What is the operating breakeven point in sales units (Q) for Trident Foods?

Sales revenues

$150,000

Explanation / Answer

Contribution Margin Ratio = 37500/150000 = 25%

operating breakeven point in sales Dollar = Fixed operating costs/Contribution Margin Ratio

operating breakeven point in sales Dollar = 24000/25%

operating breakeven point in sales Dollar = $ 96000

operating breakeven point in sales unit = operating breakeven point in sales Dollar / Selling Price

operating breakeven point in sales unit = 96000/20

operating breakeven point in sales unit = 4800 Unit

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