BreakEven Sales and Sales to Realize Income from Operations

Break-Even Sales and Sales to Realize Income from Operations

For the current year ending October 31, Yentling Company expects fixed costs of $558,900, a unit variable cost of $56, and a unit selling price of $83.

a. Compute the anticipated break-even sales (units).
units

b. Compute the sales (units) required to realize income from operations of $129,600.
units

Solution

a. Calculation of anticipated break-even sales (units)

Anticipated break-even sales (units) = Fixed Cost / (Selling Price per unit - Variable Cost per unit)

Where, Fixed Cost = $558,900

Selling Price per unit = $83

Variable Cost per unit = $56

Therefore Anticipated break-even sales (units)

= $558,900 / ($83 - $56)

= $558,900 / $27

= 20,700 units

Anticipated break-even sales (units) = 20,700

b. Calculation of the sales (units) required to realize income from operations of $129,600.

Units to get desired income = (Desired Income / Contribution margin per unit) + Breakeven units

Where, Desired Income = $129,600

Contribution margin per unit = Selling Price per unit - Variable Cost per unit

= $83 - $56

= $27

Breakeven units = 20,700

Therefore Units to get desired income would be

($129,600 / 27) + 20,700

= 4800 + 20,700

= 25,500 units

The sales (units) required to realize income from operations of $129,600 is 25,500 units