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  3. your firm expects to earn $647,800 after taxes nex

Your firm expects to earn $647,800 after taxes next year. Sales will be $3,600,000 and fixed...

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Finance

Your firm expects to earn $647,800 after taxes next year. Saleswill be $3,600,000 and fixed costs will be $1,400,000. Interestexpense will amount to $300,000. Your firm manufactures officemachines, and expects to sell 9,000 units next year. Your firm hasa 21% tax rate and the variable costs is $120 per unit. How manyunits would you have to sell to break even?

Answer & Explanation Solved by verified expert
4.3 Ratings (742 Votes)

Breakeven point is a situation of no profit no loss .

Selling price per unit =Estimated total sales /estimated number of units

                       = 3600000/9000

                       = 400 per unit

contribution per unit =selling price -variable cost

                  = 400-120

                   =$ 280 per unit

Total estimated fixed cost =other fixed cost+interest expense

                         = 1,400,000+300,000

                         = 1,700,000

Breakeven point (units) =Total estimated fixed cost /contribution per unit

                                = 1,700,000/ 280

                                = 6071.43 units (rounded to 6071 units)
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