Problem 20-8

Making a break-even point and sales needed to achieve a specified level of income (L.O. 6)

After graduating from college, M. J. Orth started a company that produced cookbooks. After three years, Orth decided to analyze how well the company was doing. He discovered the company has fixed costs of $1,200,000 per year, variable cost of $14.40 per cookbook (on average), and a selling price of $26.90 per cookbook (on average).

How many units (that is, cookbooks) must be sold to break even? How many units will the company have to sell to earn $48,000?