E7-21AFind breakeven and target profit volume (Learning Objectives 1 & 2)

Socks Unlimited produces sports socks. The company has fixed expenses of $85,000 and variable expenses of $1.20 per package. Each package sells for $2.00.

Requirements

1. Compute the contribution margin per package and the contribution margin ratio.

2. Find the breakeven point in units and in dollars.

3. Find the number of packages Socks Unlimited needs to sell to earn a $22,000 operating income.