   Chapter 21, Problem 21.4BPE

Chapter
Section
Textbook Problem

Target profitScrushy 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)

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 determine: the break-even point in sales units.

Explanation

Determine the break-even point in sales units.

Fixed cost =$200,000 Contribution margin per unit =$40 per unit (1)

Break-evenpointinSales(units) =FixedCostsContributionMarginperunit=$200,000$40=5,000units

Working note:

Determine the contribution margin per unit

(b)

To determine
the break-even point if the company desires a target profit of \$50,000.

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Why do economists make assumptions?

Essentials of Economics (MindTap Course List)

INTEREST RATE DETERMINATION AND YIELD CURVES a. What effect would each of the following events likely have on t...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)

List the four components of GDP. Give an example of each.

Principles of Macroeconomics (MindTap Course List)

What is a predetermined overhead rate? Explain why it is used.

Cornerstones of Cost Management (Cornerstones Series) 