Accounting

posted by Judy

Larry sells each unit for \$500. Variable costs per unit equal \$300. Totalfixed costs equal \$800,000. Larry is currently sellig 5,000 units per period and would like to earn net income of \$400,00.
comput: Break-evn point indollras, sales units necessary to attain desired income, and margin of safety ration for current operations.
I have break-even point: 4000
Desired sales: 204
Margin of safety? not sure where to go from here.

1. bobpursley

Margin of safety is based on current sales, 5000.

break even: n*500-n*300-800,000=0
2OON=800,000
n=4000
net income: 500n-300n-800,000=400,000
200n=1.2Million
n= 6000 units to net 400,000

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