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Homework answers / question archive / Break-Even Sales and Sales to Realize Operating Income For the current year ending December 31, McAdams Industries expects fixed costs of $1,860,000, a unit 'ariable cost of $105, and a unit selling price of $125
Break-Even Sales and Sales to Realize Operating Income
For the current year ending December 31, McAdams Industries expects fixed costs of $1,860,000, a unit 'ariable cost of $105, and a unit selling price of $125.
a. Compute the anticipated break-even sales (units).
93,000
v' units
b. Compute the sales (units) required to realize operating income of $500,000.
units
A) Computation of Anticipated Break-even Sales (Units):
Anticipated Break-even Sales (Units) = Fixed Costs/Contribution Margin per Unit
= $1,860,000/($125-$105)
= $1,860,000/$20
Anticipated Break-even Sales (Units) = 93,000 units
So, Anticipated Break-even Sales (Units) is 93,000 units.
B) Computation of Sales (units) required to realize operating income of $500,000:
Required Sales Units = (Fixed Costs + Desired Income) / Contribution Margin per Unit
= ($1,860,000+$500,000)/($125-$105)
= $2,360,000/$20
Required Sales Units = 118,000 units
So, Sales (units) required to realize operating income of $500,000 is 118,000 units.
