Fixed Costs = $ 180,000.00
Variable Costs = Number of units * $ 8.00
Total Revenue = Number of units * $ 20.00
Total Costs = $ 180,000.00 + Number of units * $ 8.00
Breakeven sales (BES) = $ 300,000.00
Breakeven in number of units sold (BEU) = 15,000
| Fixed Costs = | $ 180,000.00 |
| Variable Cost Ratio = | 40.0 % |
| Contribution Margin Ratio = | 60.0 % |
| Selling Price = | $ 20.00 |
| Contribution Margin Per Unit = | $ 12.00 |
| Target Profit = | $ 50,000.00 |
(Breakeven Unit Sales)
= Breakeven Sales / Selling Price
= $ 300,000.00 / 20.00
= Fixed Cost / Contribution Margin Per Unit
= $ 180,000.00 / $ 12.00
= 15,000
units must be sold to make a profit.
Breakeven Unit Sales for Target Profit (BEUT)
= (Fixed Cost + Target Profit) / Contribution Margin Per Unit
= ($ 180,000.00 + $ 50,000.00) / $ 12.00
= 19,167 units
| Income Statement | |
|---|---|
| Sales = BEUT * Selling Price =
(-) Variable Costs = BEUT * Selling Price * Variable Cost Ratio = (=) Contribution Margin = (-) Fixed Costs = (=) Net Income = |
$ 383,333.33
$ 153,333.33 $ 230,000.00 $ 180,000.00 $ 50,000.00 |
To achieve the target income of $ 50,000.00 , 19,167 units of product must be sold, which corresponds to $ 383,333.33 of sales.
| Sales Level | Units | Fixed Costs | Variable costs | Net Income | NI/Sales |
|---|---|---|---|---|---|
| $ 450,000.00 $ 420,000.00 $ 390,000.00 $ 360,000.00 $ 330,000.00 $ 300,000.00 $ 270,000.00 $ 240,000.00 $ 210,000.00 $ 180,000.00 $ 150,000.00 | 22,500 21,000 19,500 18,000 16,500 15,000 13,500 12,000 10,500 9,000 7,500 | $ 180,000.00 $ 180,000.00 $ 180,000.00 $ 180,000.00 $ 180,000.00 $ 180,000.00 $ 180,000.00 $ 180,000.00 $ 180,000.00 $ 180,000.00 $ 180,000.00 | $ 180,000.00 $ 168,000.00 $ 156,000.00 $ 144,000.00 $ 132,000.00 $ 120,000.00 $ 108,000.00 $ 96,000.00 $ 84,000.00 $ 72,000.00 $ 60,000.00 | $ 90,000.00 $ 72,000.00 $ 54,000.00 $ 36,000.00 $ 18,000.00 $ 0.00 $ -18,000.00 $ -36,000.00 $ -54,000.00 $ -72,000.00 $ -90,000.00 | 20.0 % 17.1 % 13.8 % 10.0 % 5.5 % 0.0 % -6.7 % -15.0 % -25.7 % -40.0 % -60.0 % |
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| Fixed Costs | = $ 180,000.00 | |
| Variable Costs | = Variable Cost per unit * Demand = $ 8.00 * 100,000 | = $ 800,000.00 |
| Total Costs | = $ 180,000.00 + $ 800,000.00 | = $ 980,000.00 |
| Target $
Sales needed to achieve the target margin | = Total Costs / (1 - Profit Margin) = $ 980,000.00 / (1 - 40.0 % ) | = $ 1,633,333.33 |
| Margin in $ | = Target Margin * Sales = 40.0 % * $ 1,633,333.33 | = $ 653,333.33 |
| Recommended Selling Price | = Target Sales / Demand = $ 1,633,333.33 / 100,000 | = $ 16.33 |