Task: Break-Even Point and Target Income
Detienne Company manufactures and sells one product for $20 per unit. The unit contribution margin is 40% of the sales price, and fixed costs total $80,000.
Problem 1. Using the equation approach, compute:
A) The break-even point in sales dollars and units.
B) The sales volume (in units) needed to generate a profit of $40,000.
C) The break-even point (in units) if variable costs increase to 80% of the sales price and fixed costs increase to $100,000.
Problem 2. See if you can recompute the solutions to 1(a), 1(b), and 1(c) in one equation step using either the contribution margin ratio or the contribution margin dollars per unit.
| Given: |
|
| Price/unit |
$20.00 |
| Contribution Margin |
40% |
|
|
| Margin/unit |
$8.00 |
| Variable Cost |
$12.00 |
|
|
| Price/unit |
$20.00 |
| Variable cost/unit |
$12.00 |
| Contribution $/unit |
$8.00 |
|
|
| Fixed Cost |
$80,000.00 |