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Khaling Company sold 26,850 units last year at $15.80 each. Variable cost was $11.70, and total fixed cost was $116,440. Required: 1. Prepare an income statement for Khaling for last year. 2. Calculate the break-even point in units. 3. Calculate the units that Khaling must sell to earn operating income of $11,480 this year.

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akiran007

Answer:

1.Operating Income (loss) (2122)

2. Break even point in units = 28126

3. Required Sales in Units=30899

Explanation:

Khaling Company

Income Statement

Sales  (26,850units* $ 15.84)                       $ 425304

Less

Variable Costs ( $11.70* 26580 units)          $ 31,0986

Contribution Margin                                    114,318

Less Fixed Costs                                         $116,440

Operating Income (loss)                               (2122)

2. Break even point in units = Fixed Costs/ Contribution Margin Per unit

                    = $116,440/$ 15.84-$11.70

                        =$116,440/ 4.14

                        = 28,125.6= 28126 units

We find the Contribution Margin Per unit by subtracting variable cost per unit from sales price per unit.

3. Required Sales in Units = Fixed Costs + Targeted Income/ Contribution Margin Per unit

                 =$116,440 +$11,480  /$ 15.84-$11.70

                  = 127920/4.14= 30898.5= 30899 units

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