Greshak Corp. produces and sells high-end entertainment systems. Its average selling price is currently $3,200 per system. Based on a review of its projected financial statements, the company’s variable costs are $1,200 per unit sold and total fixed costs are $10,000,000. Based on this information, solve the following:
- A. Greshak’s breakeven point in units?
- B. Greshak’s breakeven in US dollars?
- C. Greshak’s unit sales target if the company wants to make a profit of $3,500,000?
Answer:
We have been provided with the information as follow
Particular
Amount in $
Seeling Price
$3,200
Less:
Variable Cost
1200
Contribution Margin
$2,000
Fixed Cost= $ 10,000,000
- A. Greshak’s breakeven point in units?
BEp=Fixed Cost /Contribution Margin Per Unit
=
Fixed Cost
10,000,000
Contribution Margin
2000
BEP
5000
BEp= 5000 units
- B. Greshak’s breakeven in US dollars?
= Contribution Margin Per Unitin $ x BEP Sales
=2000 x 5000
=$ 10,000,000
- C. Greshak’s unit sales target if the company wants to make a profit of $3,500,000?
Sales Target= Fixed Cost+ Targeted Profit/ Contribution Margin Per Unit
=10,000,000+3,500,000 /2000
= 6750 Units
