Using cvp analysis to find break even points and target profit volumes mimi incorporated has a targeted operating income of $518,000 for the upcoming year. the selling price of its single product is $40.50 each, while the variable cost per unit is $12.50. fixed costs total $182,000. calculate the following:
a. contribution margin per unit
b. breakeven point in units
c. units to be sold to earn the targeted operating income

a. $28 per unit

b. 6,500 units

c.  25,000 units

Explanation:

a. The computation of the contribution margin per unit is shown below:

Contribution margin per unit = Selling price per unit - Variable expense per unit

= $40.50 - $12.50

= $28 per unit

b. The formula to compute the break even point in units is shown below:

= (Fixed expenses ) ÷ (Contribution margin per unit)  

= ($182,000) ÷ ($28)

= 6,500 units

c. The formula is shown below:

= (Fixed expenses + target operating income) ÷ (Contribution margin per unit)

= ($182,000 + $518,000) ÷ ($28)

= 25,000 units

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