Prepared Partnership prepared the following contribution format income statement
ID: 387473 • Letter: P
Question
Prepared Partnership prepared the following contribution format income statement based on a sales volume of 1,000 units (the relevant range of production is 600 units to 1,800 units):
Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $40,000
Variable expenses. . . . . . . . . . . . . . . . . . 24,000
Contribution margin. . . . . . . . . . . . . . . . 16,000
Fixed expenses. . . . . . . . . . . . . . . . . . . . . 12,000
Net operating income. . . . . . . . . . . . . . . $ 4,000
Required:
What is the break-even point in unit sales?
please give step by step instructions
Explanation / Answer
So break even is at 750 units
for 1000 units Per unit SP Sales 40000 40 VC Variable expenses 24000 24 M Contribution margin 16000 16 FC Fixed expenses 12000 12000 Net operating income 4000 Quantity Q be the breakeven SP*Q = FC+VC*Q so, M*Q = FC So Q = FC/M Q 750 units (12000/16)