Question

Flannigan Company manufactures and sells a single product that sells for $320 per unit; variable costs are $176. Annual fixed costs are $927,000. Current sales volume is $4,260,000. Flannigan Company management targets an annual pre-tax income of $1,185,000. Compute the dollar sales to earn the target pre-tax net income.

Answer 1

Answer:

Break-even point (dollars)= $4,693,333.33

Explanation:

Giving the following information:

Selling price= $320 per unit

Unitary variable costs= $176

Annual fixed costs= $927,000

Desired profit= $1,185,000

To calculate the sales in dollars required, we need to use the break-even point in dollars formula:

Break-even point (dollars)= (fixed costs + desired profit) / contribution margin ratio

Break-even point (dollars)= (927,000 + 1,185,000) / [(320-176) / 320]

Break-even point (dollars)=  2,112,000 / 0.45

Break-even point (dollars)= $4,693,333.33