Question
Kea Company manufactures and sells a specialised cordless telephone for high electromagnetic radiation environments. The company's contribution format income statement for 2020 is given below:
Kea Company manufactures and sells a specialised cordless telephone for high electromagnetic radiation environments. The company's contribution format income statement for 2020 is given below:
| $ |
Sales (20,000 phones) | 1,200,000 |
Variable expenses | 900,000 |
Contribution margin | 300,000 |
Fixed expenses | 240,000 |
Net operating income | $ 60,000 |
Management is anxious to increase the company's profit and has asked for an analysis of a number of items.
(a) Calculate the company's breakeven point in unit sales.
(b) Assume that next year management wants the company to earn a before-tax profit of at least $90,000. How many phones will have to be sold to earn this target profit?
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