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For this week’s learning journal, we are looking at calculating the contribution margin per
unit, break-even points in units, and how many units must be sold to earn an annual profit of
$750,000 for Phan Incorporated. As per Heisinger & Hoyle, (2012), contribution margin per
unit = Selling price per unit Variable cost per unit. Also, As per Heisinger & Hoyle,
(2012), to calculate the breakeven or target profit in units for a company for with multiple
products. Simply set the target profit to $0 to break even calculations or to appropriate profit
dollar amount for target profit calculations. Total fixed cost + target profit / contribution
margin per unit
Phan Incorporated has annual fixed costs totaling $6,000,000 and variable costs of $350 per
unit. Each unit of product is sold for $500.
a. Calculating the contribution margin per unit
contribution margin per unit = selling price per unit variable cost per unit
Selling per unit is $500
Variable cost per unit is $350
Contribution margin per unit = $500 - $350 = $150
Contribution margin per unit for Phan Incorporated is $150
b. Finding the break-even point in units
Break-even points in units = Total fixed cost + target profit / contribution margin per unit
Total fixed cost is $6,000,000
Target profit is $0
The contribution margin per unit cost is $150
Break-even points in units = $6,000,000 + $0 / 150 = 40,000
Break-even points in units for Phan Incorporated is 40,000 units
c. Finding how many units would be sold to earn an annual profit of $750,000
Target profit calculation = total fixed cost + target profit/contribution margin per unit
The total fixed cost is $6,000,000
Target profit is $750,000
The contribution margin per unit cost is $150
Target profit calculation = $6,000,000 + $750,000 / $150 = $6,750,000/$150 = 45,000
units.
The number of units to be sold to earn an annual profit of $750,000 is 45,000 units.
Conclusion

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For this week’s learning journal, we are looking at calculating the contribution margin per unit, break-even points in units, and how many units must be sold to earn an annual profit of $750,000 for Phan Incorporated. As per Heisinger & Hoyle, (2012), contribution margin per unit = Selling price per unit – Variable cost per unit. Also, As per Heisinger & Hoyle, (2012), to calculate the breakeven or target profit in units for a company for with multiple products. Simply set the target profit to $0 to break even calculations or to appropriate profit dollar amount for target profit calculatio ...
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