Question 4.

Cost-Volume-Profit (17 Marks)

Nec Company prepared the following income statement for 2020:

NEC COMPANY

Income Statement

For the Year Ended December 31, 2020

Sales (42,000 units) $1,512,000

Variable expenses 945,000

Contribution margin 567,000

Fixed expenses 390,000

Net income $177,000

Instructions

Answer the following independent questions and show computations to support your answers.

1. What is the companys break-even point in units in 2020?

2. How many more units would the company have had to sell to earn net income of $250,000 in 2020?

3. If the company expects a 15% increase in sales volume in 2021 over 2020, what would be the expected net income in 2021?

4. How much sales (in dollars) would the company have to generate in order to earn a target net income of $280,000 in 2021?