12 (CONTINUED) B. FIXED EXPENSES + TARGET PROFITUNIT SALES...

Exercise 6-12 (continued)

b.

Fixed expenses + Target profit

Unit sales to attain

target profit = Unit contribution margin

$180,000 + $60,000

= =20,000 units

$12 per unit

In sales dollars: 20,000 units × $40 per unit =$800,000

Alternative solution:

Dollar sales to attain = target profit CM ratio

= =$800,000

0.30

In units: $800,000 ÷ $40 per unit =20,000 units

c.

Fixed expenses

Break-even point = in unit sales Unit contribution margin

$180,000

= =11,250 units

$16 per unit

In sales dollars: 11,250 units × $40 per unit = $450,000

Break-even point= in sales dollars CM ratio

= =$450,000

0.40

In units: $450,000 ÷ $40 per unit =11,250 units