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Cost Accounting Break Even Question Need Help
Santa Fe Electronics sells televisions. The average selling price of a TV is $970. The TV's are purchased from manufacturers at an average cost of $680 per unit, which includes shipping. Since customers pick up TVs directly from the shop, the company pays no delivery charge. Sales people are paid a fixed salary plus a commission of $40 per unit. All selling and administrative expenses, including the salaries, ar fixed at a total of $58,000 per month. In order to increase their sales, the company has decided to increase the unit commission to $60 for every TV sold above break even point.
How many units of TV's does company need to sell in order to earn a net operating income of $11,500 per month (round all decimal to one unit) A) 309 B) 293 C) 243 D) 282 E) None Please show help with steps. I know a formula which is target profit + fixed expenses / cm ratio but it does not really help in getting units. |
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commission is a variable cost per unit therefore the contribution margin = $250 and $230 a unit, Fixed costs plus desired profit is $69,500 you do the math. What you have here is a step in the calculation. Therefore you solve it in two parts. If you divide by a unit value the answer you get must be related to the number of units
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