Sales = Variable Expenses + Fixed Expenses + Target Operating

question 91

Short Answer

Sales = Variable expenses + Fixed expenses + Target operating income
$4.50Q = $3.00Q + $120,000 + $0
$1.50Q = $120,000
Q = $120,000/$1.50 = 80,000 units
2.80,000 units x $4.50 = $360,000
3.Sales = Variable expenses + Fixed expenses + Target operating income
$4.50Q = $3.00Q + $120,000 + $90,000
$1.50Q = $210,000
Q = $210,000/$1.50 = 140,000 units
4.Margin of safety = Sales - Sales at break-even
= $540,000 - $360,000
= $180,000

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Definitions:

Previous Year

The 12-month period immediately before the current year, used as a reference point for comparing data or statistical analysis.

Unemployment

The situation where individuals who are willing and able to work are not currently employed.

Inflation

The magnitude of growth in the overall price points for goods and services, weakening the efficacy of spending power.

Government Spending

The total amount of money expended by a government on various sectors, including infrastructure, education, defense, and social services.