The following is from Alsatia Corporation\'s financial statement information for
ID: 2718336 • Letter: T
Question
The following is from Alsatia Corporation's financial statement information for last month:
Sales $1,400,000
Variable Expenses 900,000
Fixed Expenses 300,000
The company has no beginning or ending inventories and produced and sold 10,000 units during the month.
A) What is the company's break-even in units?
B) How many units would the company have to sell to attain target profits of $225,000?
C) What is the company's degree of operating leverage?
Show all work. Answer all parts.
Explanation / Answer
A) Break Even Point = Fixed cost/comtribution Contribution= Sales- Variable cost 1,40,000-900000 $500,000 So BEP= 300000/500000 0.6 B) No of Unit would the company have to sell to attain target profit Contribution per unit= sales-variable cost/no of unit 1400000-900000/10000 50 Target profit= (sale volume*cont. per unit)-fixed cost $225000=(Sale Volume*50)-300000 $225000+300000/50= Sale volume $10,500 so no. of unit to be produce is $10,500
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