[scottmenhorn]

Not sure if I'm correct on b. listed below.

Question:
Hazardous Toys Company produces boomerangs that sell for $8 each and have a variable cost of $7.50. Fixed costs are $15,000.

a. Compute the break-even point in units.

$15,000 = $15,000 = 30,000 units
8-7.5 .50

b. Find the sales (in units) needed to earn a profit of $25,000.

$25,000 = 50,000 units
.50

[morgaine300]

a. Compute the break-even point in units.

$15,000 = $15,000 = 30,000 units
8-7.5 .50

This is correct.

b. Find the sales (in units) needed to earn a profit of $25,000.

$25,000 = 50,000 units
.50

This is part way there. You have .50 to contribute towards fixed costs, and then every unit beyond break-even contributes .50 towards profit. You need 30,000 units just to break-even, so this 50,000 units is what is above and beyond that. i.e. 50,000 more units.

Technically, the equation is (fixed + target profit)/unit contribution margin. However, you can do it your way -- you just have to remember that if you only do the $25,000 of profit, you have to add that to the break-even units.