Forest Company sells a product for $145 per unit. The Costs that vary in total d
ID: 2501810 • Letter: F
Question
Forest Company sells a product for $145 per unit. The Costs that vary in total dollar amount as the level of activity changes.variable cost is $85 per unit, and Costs that tend to remain the same in amount, regardless of variations in the level of activity.fixed costs are $486,000.
Determine (a) the The level of business operations at which revenues and expired costs are equal.break-even point in sales units and (b) the break-even point in sales units if the company desires a target profit of $160,380.
a. Break-even point in sales units units b. Break-even point in sales units if the company desires a target profit of $160,380 unitsExplanation / Answer
(a) Break even point is the volume at which the sales value is equal to the costs associated
In this case, let us assume the no. of units sold as X
The sales value = X * $145 = $145X
Variable Costs = X * $85 = $85X
Fixed Costs = $ 486,000
For the breakeven point, 145X = 85X + 486,000
Hence, 60X = 486,000
Therefore, X which is the break even point in sales units = 486,000/60 = 8,100 units
(b) In case the company desires a target profit of $ 160,380
Let us assume the no. of units sold as Y
Sale Value = $145Y
Variable Costs = $85Y
Fixed Costs = 486,000
Sales - Costs = Profit
Therefore, $145Y-$85Y-486,000 = 160,380
Hence, 60Y = 160,380 + 486,000 = 646,380
Hence, Y = 646,380/60 = 10,773 units