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Paney Company makes calendars. Information on cost per unit is as follows: Direct materials $1.50 Direct labor 1.20 Variable overhead 0.90 Variable marketing expense 0.40 Fixed marketing expense totaled $13,000 and fixed administrative expense totaled $35,000. The price per calendar is $10. What is the break-even point in units? How many unit must be sold to yield targated income of $36000?

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Answer

(1) break even point(units) = 8000 units

(2) units to be sold to yield $36000 = 14000 units

Explanation:

(1) BEP = FC/ unit contribution

where, FC ; 13000+35000 = 48000

             unit contribution; 10-(1.5+1.2+0.9+0.4) = $6

BEP = $48000/$6 = 8000 units.

(2) Target sales =(FC + target income)/ unit contribution

                          = ($48000+$36000)/$6

                          = 14000 units.

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