Question

Question # 2 — Cost-Volume-Profit
Safe Harbor Company prepared the following income statement for 2017:

SAFE HARBOR COMPANY
Income Statement
For the Year Ended December 31, 2017
——————————————————————————————————————————
Sales (20,000 units) $600,000
Variable expenses 360,000
Contribution margin 240,000
Fixed expenses 150,000
Net income $ 90,000


Instructions:
Answer the following independent questions and show computations to support your answers.
1. What is the company's break-even point in units?


2. How many more units would the company have had to sell to earn net income of $150,000 in 2017?

3. If the company expects a 25% increase in sales in 2018, what would be the expected net income in 2018?


4. How much sales dollars would the company have to generate in order to earn a target net income of $160,000 in 2018?


Please Solve As soon as
Solve quickly I get you two UPVOTE directly
Thank's
Abdul-Rahim Taysir

Answer 1

1. Break Even Point in Unit = 12500 Units

Fixed Cost / Contribution per unit = 150000 / (240000 / 20000) = 150000 / 12 = 12500 units

2.

Answer is 5000 units

Targeted Profit = 150000

Fixed cost+Targeted Profit/Contrbition per unit= 150000 + 150000 / 12 = 25000 units - 20000 (Actual units) =5000

Seling price unit = 600000 / 20000 = 30

Variable Expense per unit = 360000 / 20000 = 18

So following is the list of 25000 units

Sales = 750000

Variable Expense = 450000

Contribution Margin = 300000

Fixed Expense = 150000

Net Income = 150000

3.

The answer is 150000

25% of sales units in 2017  = 20000 x 25% = 5000 = expected units will be 20000 + 5000 = 25000

Sales (25000 x 30) = 750000

Variable Expense (25000 x 18) = 450000

Contribution Margin = 300000

Fixed Expense = 150000

Net Income = 150000

4.

The answer is 175000 (775000 - 600000)

Targeted Profit = 160000

Fixed Cost + Targted Profit / Contribution Margin per unit = 150000 + 160000 / 12 = 25833.33 units

Sales	775,000
Variable Expense	465,000
Contribution Margin	310,000
Fixed Expense	(150,000)
Net Income	160,000

Here selling price per unit is 30 and variable expense is 18. total units are 25833.33 units