Answer:
Instructions are below.
Explanation:
Giving the following information:
Cannon Co. has a unit selling price of $500, variable cost per unit $300, and fixed costs of $240,000.
First, we need to calculate the break-even point in units using the following formula:
Break-even point in units= fixed costs/ contribution margin per unit
Break-even point in units= 240,000/ (500 - 300)
Break-even point in units= 1,200 units
To calculate the break-even point in dollars, we need to use the following formula:
Break-even point (dollars)= fixed costs/ contribution margin ratio
Break-even point (dollars)= 240,000/ (200/500)
Break-even point (dollars)= $600,000
We can prove it:
Break-even point (dollars)= 1,200*$500= $600,000
Finally, we need to incorporate the desired profit to the break-even point in units:
Break-even point in units= (fixed costs + desired profit)/ contribution margin per unit
Break-even point in units= (240,000 + 60,000) / 200= 1,500 units
