3-a. How many units would have to be sold each month to earn a target profit of $52,800? Use the formula method. Total costs are compared to total revenue and are either lower (profit), higher (loss), or equal (break-even point). Learn to calculate this and identify target profit, as well as establish a margin of safety to accommodate unanticipated risks.
How many units would have to be sold each month to earn a target profit of P90,000? Verify your answer by preparing a contribution format income statement at the target sales level. Target analysis is a subset of cost volume profit analysis, a broader concept. It is the next step for organizations after the break-even platform, where sales revenue can only cover fixed and variable overhead with no profit. Nonetheless, in the target profit analysis, the company’s goal is to earn the targeted profit above and beyond its expenses.
Answer & Explanation
Refer to the original data. Compute the company’s margin of safety in both dollar and percentage terms. Compute the company’s margin of safety in both dollar and percentage terms.