Xi-Tech, Inc. is considering the introduction of a new music player with the following price and cost characteristics:Sales price$125eachVariable costs 75eachFixed costs 180,000per yearRequired:(a) How many units must Xi-Tech sell to break even?(b) How many units must Xi-Tech sell to make an operating profit of $120,000 for the year?(c) If projected sales are 7,500 units, what is the margin of safety in units?
What will be an ideal response?
(a)
$180,000/($125 ? $75) = 3,600 units.
(b)
($180,000 + $120,000)/($125 ? $75) = 6,000 units.
(c)
7,500 ? 3,600 = 3,900 units.
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