Frank Corporation manufactures a single product that has a s

Frank Corporation manufactures a single product that has a selling price of $25.00 per unit. Fixed expenses total $33,000 per year, and the company must sell 5,500 units to break even. If the company has a target profit of $12,000, sales in units must be: 5,980 6,820 7,000 7,500

Solution

SELLING PRICE 25 FIXED EXPENSE 33000 BREAK EVEN POINT 5500 UNITS BREAK EVEN POINT = FIXED EXPENSE / (SELLING PRICE - VARIABLE COST) 5500 = 33000 / (25 - VARIABLE COST) 25 - VARIABLE COST = 33000/ 5500 25 - VARIABLE COST = 6 VARIABLE COST = 25 - 6 VARIABLE COST = 19 FOR TARGET PROFIT OF $ 12000 BREAK EVEN POINT = (FIXED EXPENSE + TARGET PROFIT) / (SELLING PRICE - VARIABLE COST) (33000 + 12000) / (25 - 19) 7500 UNITS ANS = 7500 UNITS