Question

A company producing a product and sell it with 70$ for one unit, to produce the unit it has changing costs equal to 40$, and the constant costs equal to 700k$, and the company has a target to reach of 20% to the badget of the investment mony wich equal to 400k$, find

1- determine the sales volume of the unit
2- determine the breakeven value in dollars
3- determine the sales volume in units and the breakeven value in dollars necessary to achieve the target profit determined by the company's management

Answer 1

Selling Price	$70
Less: Variable Cost	$40
Contribution Margin	$30
Contribution Ratio = $30/$70	42.86%
Fixed Cost	$              700,000.00
a) BEP (units) = Fixed cost/(Contribution Margin)
BEP (units) = $700,000/$30	23,333.33	Units
b) BEP (dollars) = $700,000/42.86%	$           1,633,333.33
c)
Units to Achieve a Target Income = (Total Fixed Costs + Target Income) / Contribution Margin Per Unit
Units to Achieve a Target Income = ($700,000 + $400,000 ) / $30	36,666.67	Units
Sales to Achieve a Target Income = (Total Fixed Costs + Target Income) / Contribution Margin Ratio
Sales to Achieve a Target Income =  ($700,000 + $400,000 ) / $42.86%	$           2,566,666.67