Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher

Exercise 26

Basic Decision Analysis Using CVP

Balance, Inc., is considering the introduction of a new energy snack with the following price and cost characteristics:

Sales price	$ 1.00 per unit
Variable costs	0.20 per unit
Fixed costs	400,000 per month

Required

a. What number must Balance sell per month to break even?

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b. What number must Balance sell per month to make an operating profit of $ 100,000?

Step 1 of 6

Target volume (in units)

Target volume represents the number of units to be sold by company in order to earn target net income for the year. Target volume is calculated using fixed costs, target operating profit and unit contribution margin.