7. Narchie O wil break even by selling 1.004000 unns O cannot break-even because

Question

7. Narchie O wil break even by selling 1.004000 unns O cannot break-even because it loses money on every unit sold O will break-even by selling 24,000 units O wil break-even by seling 17.333 unis Ow ll breek-even by selling 12.000 units 8. Required Information The following infarmation applies to the questions displayed below Norchesells a single product for S80 Variable costs are 50% of the seling pnce, and in order to produce a terget profit of 528,000, Narchic's dollar sales ust rotal: O $19.560 O S1.976,000 O $24.700 O $1921000 O an amournt other thon those nbove ihe coepany has fixed costs thet emount $960 000 Current salss tocal 19,000 9. d Narchie sells 24700 units, its safety mergin wll be O an amoum other than those above. $280000 O $336000 O $56.000 O $12,000

Explanation / Answer

7.Narchie will breakeven by selling 24000 units

Breakeven in units = Fixed cost / (selling price - variable cost ) = 960000 / ( 80-40) = 24000 units

8.Inorder to produce target profit of $28000.Narchie's dollar sales must total:

(Fixed cost + target profit) / contribution margin % = ( 960000 + 28000 ) / (40/80) = 988000 / 50% = 1976000

9.Margin of safety = Sales - Breakeven sales

Sales = 24700 x 80 = 1976000 ;Breakeven sales = 24000 x 80 = 1920000

Margin of Safety = 1976000 - 1920000 = 56000

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