In Corporation has a single product whose selling price is $120 per unit and whose variable expense is $80 per unit. The company’s monthly fixed expense is $50,000. Required: 1. Calculate the unit sales needed to attain a target profit of $10,000. 2. Calculate the dollar sales needed to attain a target profit of $15,000.

1. 1,500 units

2. $195,000

Explanation:

1. The unit sales needed to attain a target profit is shown below that is break even point in sales:-

= (Fixed expenses + target profit) ÷ (Contribution margin per unit)

where,  

Contribution margin per unit = Selling price per unit - Variable expense per unit

= $120 - $80

= $40

So, the unit sales is

= ($50,000 + $10,000) ÷ ($40)

= $60,000 ÷ $40

= 1,500 units

2. The dollar sales i.e break even point in dollars is shown below:-

= (Fixed expenses + target profit) ÷ (Contribution margin ratio)

where,

Contribution margin ratio is

= (Contribution margin per unit) ÷ (selling price per unit) × 100

= ($40) ÷ ($120) × 100

= 33.33%

So, the dollar sales is

= ($50,000 + $15,000) ÷ 33.33%

= $65,000 ÷ 33.33%

= $195,000  

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