Problem:
The income statement for Raple Stark Company for 2006 appears below.
Raple Stark Company
Income Statement
For the Year Ended December 31 , 2006
Sales (25,000 units) $ 650,000
Variable expenses 227,500
Contribution margin 422,500
Fixed expenses 439,400
Net income (loss) $ (16,900)
Instructions:
Answer the following independent questions and show computations to support your answers:
Question 1. How much additional sales revenue does the company need to break-even in 2006?
Question 2. If the company is able to reduce variable costs by $1.25 per unit in 2007 and other costs and unit revenues remain unchanged, how many units will the company have to sell in order to earn a net income of $50,650?