Break-Even Sales and Sales to Realize Operating Income For the current year endi
ID: 2561336 • Letter: B
Question
Break-Even Sales and Sales to Realize Operating Income
For the current year ending December 31, McAdams Industries expects Costs that tend to remain the same in amount, regardless of variations in the level of activity.fixed costs of $551,600, a unit Costs that vary in total dollar amount as the level of activity changes.variable cost of $56, and a unit selling price of $84.
a. Compute the anticipated break-even sales (units).
units
b. Compute the sales (units) required to realize operating income of $126,000.
units
Explanation / Answer
BEP in units = Fixed cost/ (sales price – variable cost)
= 551600/(84 – 56)
= 551600/28
= 19700
To reach BEP company must sell 19700 units
Sales required for desired profit = (Fixed cost+ desired profit)/ (sales price – variable cost)
= 551600+ 126000/(84 – 56)
= 677600/ 28
= 24200 units