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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Break-even sales and sales to realize income from operations

For the current year ended October 31, Yentling Company experts fixed costs of $14,000,000, a unit variable cost of $200, and a unit selling price of $300.

  1. a. Compute the anticipated break-even sales (units).
  2. b. Compute the sales (units) required to realize income from operations of $1,400,000.

a.

To determine

Target Profit: It refers to the desired amount of profit that a company expects to achieve by the end of an accounting period after it reaches its break-even point. Thus, the company needs to compute the required sales to earn the target profit. The formula to calculate the required sales to earn the target profit is as follows:

Sales(units) =FixedCosts+TargetProfitUnitContributionMargin

To compute: the anticipated break-even point sales (units).

Explanation

Compute the anticipated break-even point sales (units).

Fixed cost =$14,000,000

Contribution margin per unit =$100 per unit (1)

Break-evenpointinSales(units) =FixedCostsContributionMarginperunit=$14,000,000$100=140,000units

Working note:

Compute the contribution margin per unit

b.

To determine

To compute: the sales (units) required to realize income from operations of $1,400,000.

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