Question

Target Profit Scrushy Company sells a product for $150 per unit. The variable cost is $110 per unit, and fixed costs are $200,000. Determine (a) the break-even point in sales units and (b) the break-even point in sales units if the company desires a target profit of $50,000. a. Break-even point in sales units units b. Break-even point in sales units if the company desires a target profit of $50,000

Answer 1

a. $750,000

b. $937,500

Step-by-step explanation:

The break even point is the number of units an entity must sell to make no profit or loss. It is the number of units that makes the sale equal to the total expense. The total expense is made up of the fixed cost and the variable cost.

Let the number of units required to break even be T

150T = 110T + 200,000

40T = 200,000

T = 5,000

Break even sales = 5,000 × $150

= $750,000

To make a profit of $50,000, let the unit to be sold be F

150F - (110F + 200,000) = 50,000

40F - 200,000 = 50,000

40F = 250,000

F = 6250

Break even point in sales at this point = 6250 × $150

= $937,500