Question:
Budgeted sales of $2,500,000 for 50,000 units
Variable Cost= $350,000 for manufacturing and $25,000 selling
Fixed Cost= $650,000 for mfg and $75,000 for selling and admin.
I need the break even point for both units and dollars
they also want to see how many units needed to produce $1,000,000 in profit.
the equation is : Sales- Variable Cost=CM
FC/CM=Break even then add $1,000,000 to FC...but i don't know how to get started. please help!
Answers:
Uh... find the price per unit. 2.5M/50k = $50/unit
Find Variable cost per unit: 375k/50k = $7.5
Find Profit per unit before Fixed Costs: 50 - 7.5 = $42.5
This means you make $42.5 on each unit you sell, before taking into account fixed costs.
Total Fixed Cost: 650k + 75k = $725,000
$725,000/$42.5 = ~17,059 units
If you want to make a million dollars profit, just add $1M to the fixed cost in the above equation.
$1,725,000/42.5 = ~$40589 units
I didn't check my math so you should, but it's in the realm of the budgeted profit ($1.4M for 50k units sold)
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