If a firm has a break-even point of 20,000 units and the contribution margin on the sirm's single product is $3.00 per unit and fixed costs are $60,000, what will the firm's net income be at sales of 30,000 units?
o.k. the break even amount will be 20,000 units time $3.00 = $60,000
total sales is 30,000 units times $3.00 = $90,000
$90,000 - $60,000 = $30,000 net income
$30,000 net income FINAL ANSWER
Is this correct???
Yes, this is correct.
Yes, your calculation is correct. At sales of 30,000 units with a contribution margin of $3.00 per unit and fixed costs of $60,000, the firm's net income would be $30,000.
Yes, your calculation is correct. I'll explain how you arrived at the answer step by step:
1. Start with the break-even point: The break-even point is the level of sales at which total revenue equals total costs, resulting in zero net income. In this case, the break-even point is 20,000 units.
2. Calculate the total contribution margin: The contribution margin is the difference between the selling price per unit and the variable cost per unit. In this case, the contribution margin is $3.00 per unit.
3. Determine total fixed costs: Fixed costs are costs that do not vary with the level of production or sales. In this case, the fixed costs are $60,000.
4. Find the total sales revenue: To calculate the total sales revenue, multiply the number of units sold (30,000) by the selling price per unit ($3.00). Therefore, the total sales revenue is $90,000.
5. Calculate the net income: Net income is the difference between total sales revenue and total costs. Subtract the total fixed costs ($60,000) from the total sales revenue ($90,000) to find the net income. In this case, the net income is $30,000.
So, to answer your question, yes, your final answer of $30,000 net income is correct for sales of 30,000 units.