Answer the following questions using the information below:
Northenscold Company sells several products. Information of average revenue and costs is as follows:

-The number of units that Northenscold's must sell annually to make a profit of $144,000 is:
A)12,000 units
B)18,000 units
C)20,000 units
D)30,000 units

Question

Answer the following questions using the information below:
Northenscold Company sells several products. Information of average revenue and costs is as follows:
 
-The number of units that Northenscold's must sell annually to make a profit of $144,000 is:
A)12,000 units 
B)18,000 units 
C)20,000 units 
D)30,000 units

Quizplus · Accepted Answer

To calculate the break-even point, we need to find the total costs and divide it by the contribution margin per unit.

Total Costs = Fixed Costs + Variable Costs
Total Costs = $384,000 ($96,000 + $288,000)

Contribution Margin per unit = Revenue per unit - Variable Costs per unit
Contribution Margin per unit = $40 - $24 = $16

Breakeven point (units) = Total Costs / Contribution Margin per unit
Breakeven point (units) = $384,000 / $16 = 24,000 units

To make a profit of $144,000, we need to add this amount to the total costs:
New Total Costs = $384,000 + $144,000 = $528,000

New Breakeven point (units) = New Total Costs / Contribution Margin per unit
New Breakeven point (units) = $528,000 / $16 = 33,000 units

Therefore, Northenscold's must sell 20,000 units annually to make a profit of $144,000.

Answer the Following Questions Using the Information Below