Explain and compare how to compute the units produced and sold for aTarget Income and for...

Explain and compare how to compute the units produced and sold for aTarget Income and for the Break-even point and provide an example for computing the units produced and sold for a Target Income and for the Break-even point.

Expert Solution

Contribution margin per unit = Selling Price per unit-Variable cost per unit

Breakeven point in units is the number of units where profit is NIL.

Breakeven point in units = Fixed costs/ Contribution margin per unit

Number of units to achieve target profit = (Target profit+Ficed costs)/Contribution margin per unit

Example:

Selling price per unit = $120
Variable cost per unit = $40

Therefore,
Contribution margin per unit= $80

Fixed costs = $160000

Then,
Breakeven point in units = $160000/$80
	= 2000 units

If,
Targeted profit = $80000

Then,
Number of units to achieve targeted profit = ($160000+$80000)/$80

		= 3000 units

ekkarill92 answered 2 years ago

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