Bribie Island Baskets Ltd. manufactures a single basket that is sold to wholesalers for $20. The contribution margin ratio is 40%. Bribie's fixed expenses total $600,000.
Instructions:
(a) Compute the variable cost per unit.
(b) Compute how many baskets Bribie will have to sell in order to break even.
(c) Compute how many baskets Bribie will have to sell in order to make a target profit of $16,000.
(d) Prove your answer in part (c) above by preparing a cost-volume-profit income statement at that level of activity.

Question

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The Answer of Bribie Island Baskets Ltd. manufactures a single basket that is sold to wholesalers for $20. The contribution margin ratio is 40%. Bribie's fixed expenses total $600,000.
Instructions:
(a) Compute the variable cost per unit.
(b) Compute how many baskets Bribie will have to sell in order to break even.
(c) Compute how many baskets Bribie will have to sell in order to make a target profit of $16,000.
(d) Prove your answer in part (c) above by preparing a cost-volume-profit income statement at that level of activity.