Question

Break-Even Sales and Cost-Volume-Profit Chart

For the coming year, Sorkin Company anticipates a unit selling price of $66, a unit variable cost of $33, and fixed costs of $369,600.

Required:

1. Compute the anticipated break-even sales in units.
units

2. Compute the sales (units) required to realize income from operations of $194,700.
units

3. Construct a cost-volume-profit chart, assuming maximum sales of 22,400 units within the relevant range. From your chart, indicate whether each of the following sales levels would produce a profit, a loss, or break-even.

$1,036,200
$924,000
$739,200
$554,400
$442,200

4. Determine the probable income (loss) from operations if sales total 17,900 units. If required, use the minus sign to indicate a loss.
$

Answer 1

Solution:

Part 1 –

Anticipated break-even sales in units = Total Fixed Costs / Contribution Margin per unit

Contribution Margin per unit = Unit Selling Price $66 – Unit Variable Cost 33 = $33

Anticipated break-even sales in units = Total Fixed Costs $369,600 / Contribution Margin per unit 33

= 11,200 Units

Part 2 ---

Sales units required to realize income from operation of $194,700 = (Total Fixed Cost 369,600 + Income from Operation $194,700) / Contribution Margin per unit 33

= $564,300 / 33

= 17,100 Units

Part 3 --- this part is not clear to me.. can you please also provide chart

Part 4 –

WE need to prepare income statement for this part

	$$
Sales Revenue (17,900 Units x $66)	$1,181,400
Less: Variable Costs (17,900*33)	$590,700
Contribution Margin	$590,700
Less: Fixed Costs	$369,600
Income from Operation	$221,100

Probable income = $221,100

Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you