Khaling Company sold 19,000 units last year at $18.00 each. Variable cost was $14.60, and total fixed cost was $68,000. Required: 1. Prepare an income statement for Khaling for last year. 2. Calculate the break-even point in units. 3. Calculate the units that Khaling must sell to earn operating income of $20,400 this year.

Explanation:

income statement for Khaling for last year.

Sales of 19,000 units last year at $18.00 each. = 19,000 * $18 = $342,000

Variable cost was $14.60 per unit = 19,000 x $14.60 = $277,400

Total fixed cost was $68,000

Income Statement

Sales. $342,000

Less:

Variable cost $277,400

Fixed cost. $68,000

Loss. ($3,400)

2. Calculate the break-even point in units.

BEP = fixed cost / (selling price - variable cost)

BEP = 68,000/(18-14.60)

BEP = 68,000/3.4

BEP = 20,000 units

3. Calculate the units that Khaling must sell to earn operating income of $20,400 this year.

The total units to be sold is 26,000 units to earn a profit of $20,400

Sales (26,000*18). $468,000

Less

Variable (26,000*14.60) $379,600

Fixed cost. $68,000

Income. $20,400

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