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17 July, 16:51

Freeland Company sells Popits for $20. The following is the projected Income Statement for 2018. Variable costs are the cost of the Popits, $10 each, plus a 10% sales commission paid to the worker. Sales $300,000 Cost of Popits Sold 150,000 Gross Margin 150,000 Operating Expenses Salaries and Commissions 60,000 Rent 24,000 Other Fixed Expenses 10,000 Total Operating Expenses 94,000 Net Income $ 56,000 For Freeland, the number of Popits she needs to sell to break even are A. 6,620 B. need more information to calculate this C. 9,074 D. 8,000 E. 11,750

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  1. 17 July, 18:33
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    D. 8,000

    Explanation:

    The computation of break even is shown below:-

    Variable cost per unit = Cost of Popits per unit + Sales commission per unit

    = $10 + (10% * $20)

    = $10 + $2

    = $12

    Contribution margin per unit = Sales per unit - Variable cost per unit

    = $20 - $12

    = $8

    Total fixed Cost = Salaries + Rent + Other fixed cost

    = ($60,000 - $30,0000) + $24,000 + $10,000

    = $30,000 + $24,000 + $10,000

    = $64,000

    Now,

    Break-even units = Fixed cost : Contribution per unit

    = $64,000 : 8

    = 8,000

    Therefore for computing the break-even units we simply applied the above formula.
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