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Break Even Point

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The information that follows was obtained from the account records of Gladstone Mfg. during a period when the company sold 100.000 units.

Sales $8,800.000
Variable Costs 2,400,000
Fixed Costs 6,016,000

Required:
A. Compute the company's per unit contribution margin and break even point.
B. How many units must Gladstone sell to produce a target net profit of $550,400?
C. Assume that Gladstone was able to reduce the variable cost per unit by $4. What selling price would management charge if it desired to maintain the current break even point?

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Solution Summary

The solution explains some calculations relating to breakeven point. This posting helps compute the company's per unit contribution margin and break even point, find the units Gladstone has to sell to produce a target net profit, and selling price a management would charge.

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A. Compute the company's per unit contribution margin and break even point.
Unit contribution margin = selling price per unit - variable cost per unit
Selling price per unit = 8,800,000/100,000 units = $88
Variable cost per unit = 2,400,000/100,000 units ...

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