Sam Manufactures a Product That Is Selling So Well, He

Short Answer

Sam manufactures a product that is selling so well, he has decided to expand his operation to 50,000 units per month. The unit cost is $7, estimated fixed costs are $1.8 mil per year and variable costs are $5 per unit. The product currently sells for $20. Use the graphical approach to CVP analysis to solve the following:
a) What is the break-even point as a percent of capacity?
b) What would the net income be at 75% capacity?
c) What would unit sales have to be to attain a net income of $100,000?
d) If sales dropped to 50% of capacity, what would the resulting net income be?