Reid Recreation Products sells the Amazing Foam Frisbee for $12. The variable cost per unit is $3: fixed costs are $36,000 per month. What is the annual breakeven point in units? In sales dollars? (Use your answer of breakeven units to calculate the breakeven point in dollars. Round answers to 0 decimal places, e.g. 5,275.) The breakeven point frisbees The breakeven sales $ How many frisbees must Reid sell to earn $18,000 in operating income? (Round answer to 0 decimal places, e.g. 5,275.) frisbees What operating income must Reid earn to realize net income of $16,200, assuming that the company is in the 40% tax bracket? (Round answer to 0 decimal places, e.g. 5,275.) Operating income $ How many frisbees must Reid sell to earn $16,200 in net income, assuming that the company is in the 40% tax bracket? (Round answer to O decimal places, e.g. 5,275.) frisbees

## Expert Answer

a) BEP ( units ) = Fixed cost / CM per unit = 36000 / (12 – 3 ) = 4000 units

BEP ( $ ) = 4000 * 12 = $ 48000

b) Units to be sold = ( target income + fixed cost ) / CM per unit = ( 18000 + 36000 ) / (12 – 3 ) = 6000 units

c) Operating income – 40 % * Operating income = 16200

Operating income = $ 27000

d) To earn net income of $ 16200 , operating income of $ 18000 should be earned ( as calculated in c ) and to earn operating income of $ 18000 , 6000 units to be sold ( as calculated in b )

We take income before taxes for calculating units to be sold.