Harmony Sells a Product for $50 Per Unit

question 94

Essay

Harmony sells a product for $50 per unit.Variable costs per unit are $30,and monthly fixed costs are $150,000.Answer the following questions:
a.What is the break-even point in units?
b.What unit sales would be required to earn a target profit of $100,000?
c.Assume they achieve the level of sales required in part b,what is the degree of operating leverage?
d.If sales increase by 40% from that level,by what percentage will profits increase?

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Definitions:

Guidelines

Guidelines are recommendations or principles that aim to streamline certain processes or set standards.

Risk and Return

A financial concept indicating that the potential return on any investment is directly correlated with the level of risk taken.

Balance Sheet

A financial statement that provides a snapshot of a company's financial condition at a specific point in time, detailing assets, liabilities, and shareholders' equity.

Statement of Cash Flows

A document that outlines the effect of changes in income and balance sheet accounts on cash and cash equivalents, divided into sections for operating, investing, and financing activities.