For the coming year, Loudermilk Inc. anticipates fixed costs of $600,000, a unit variable cost of $75, and a unit selling price of $125. The maximum sales within the relevant range are $2,500,000.
a. Construct a cost-volume-profit chart on a sheet of paper. Indicate whether each of the following levels of sales (units or dollars) is in the operating profit area, operating loss area, or at the break-even point.
4,800 units
12,000 units
$1,500,000
20,000 units
$2,500,000
B. Estimate the break-even sales (dollars) by using the cost-volume-profit chart constructed in part (a).