View Full Version : Manegrial Accounting
andrep
Mar 27, 2007, 07:43 AM
If a corporation desires to earn a target net income of $40,000 and the selling price per unit is $30, unit variable cost is $24, and the total fixed costs are $160,000, then what is the number of units the company must sell to earn its target net income?
avenger9000
Mar 28, 2007, 02:37 AM
Net Target Income 40,000
Total Fixed Costs 160,000
Contribution Margin Needed 200,000
Contributio Margin per unit 30 - 24 = 6
so units needed = 200,000 / 6 = 33333 units
Check
Total Income @ 3333 units 999,990
Total Varibale Cost 799,992
Contribution 199,998 (Due to rounding)
Fixed Costs 160,000
Net Income 39,998
This is the best I can do since the answer for number of units was recurring and I rounded it
CaptainForest
Mar 28, 2007, 03:05 PM
The answer is 33,333.33 units.
So since you can't sell a fraction unit, you will have to sell 33,334 to go over $40,000 since no amount will actually get your $40,000 on the dot.