Zeta Corp's most recent income statement is given below
Sales (8,000 units) $160,000
Less variable expenses (68,000)
Contribution margin 92,000
Less fixed expenses (50,000)
Net income $ 42,000
Required:
a. Contribution margin per unit is $ ________ per unit
b. If sales are doubled to $240,000,
total variable costs will equal $ ________
c. If sales are doubled to $240,000,
total fixed costs will equal $ ________
d. If 20 more units are sold, profits will increase by $ ________
e. Compute how many units must be sold to break even. # ________
f. Compute how many units must be sold
to achieve profits of $60,000. # ________
Answer:
a. Contribution margin per unit is $92,000 / 8,000 = $11.5
b. Variable cost = $68,000 × 2 = $136,000
c. Fixed cost = $50,000
d. Contribution margin of $11.50 × 20 units = $230
e. Breakeven point in units = Fixed costs of $50,000 / Contribution margin per unit $11.50 = 4,348 units
f. Desired sales = (Fixed costs of $50,000 + Desired profits $60,000) / $11.50 = 9,566 units
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