T-Tunes, Inc., is considering the introduction of a new music player with the fo

Question

T-Tunes, Inc., is considering the introduction of a new music player with the following price and cost characteristics: sales price..............................................$ 180 each variable costs.........................................$ 100 each fixed costs................................................$ 200,000 per year required A_ what number must T-tunes sell per year to break even? B_ what number must T-Tunes sell to make an operating profit of $160,000 for the year? this is 3-21 fundamental of cost accounting by lanen
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Source:ISBN: 0077274997 | Title: Fundamentals of Cost Accounting | Publisher: McGraw-Hill Higher Education

Explanation / Answer

(A)Break even units of T-Tunes = 200000 / (180 - 100) = 2500 Break even sales units = 2500 (B)Units of T-tunes to be sold to make a profit of 160000 = (fixed cost + profit)/contribution margin per unit = (200000 + 160000)/80 = 4500 Break even sales units = 4500

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