Hammond Inc. sells a product for $66. Variable costs are 60% of sales, and month
ID: 3009149 • Letter: H
Question
Hammond Inc. sells a product for $66. Variable costs are 60% of sales, and monthly fixed costs are $60,456.
a.
What is the break-even point in units? (Do not round intermediate calculations.)
b.
What unit sales would be required to earn a target profit of $134,376?(Do not round intermediate calculations.)
c.
Assume they achieve the level of sales required in part b, what is the margin of safety in sales dollars?(Do not round intermediate calculations. Omit "$" sign in your response.)
Hammond Inc. sells a product for $66. Variable costs are 60% of sales, and monthly fixed costs are $60,456.
Explanation / Answer
Break Even Point in units = Fixed Cost / Contribution Margin per unit
= 60456 / (66*40%)
= 60456 / 26.4
2290 Units
Target Point BEP = Fixed Cost + Target Profit / Contribution Margin per Unit
= 60456+134376 / 26.4 = 7380 Units
Margin of safety in units = 7380-2290 = 5090
Sales at margin of safety in units = 5090*66 = $ 335940
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