[lisaalex4]

If a company has a net income of $155,400 in 2008 and the selling price is $160, the variable costs per unit were $100, and the fixed costs were $570,000. Management expects per unit data and total fixed costs to remain the same in 2009. They want to increase the net income by $60,000 in 2009. How do I compute the number of units sold in 2008? And compute the number of units that would have to be sold in 2009 to reach their desired level and if they sell the same number of units in 2009 as it did in 2008 what would the selling price have to be in order to reach the profit level?

[rehmanvohra]

You can calculate the number of units sold as follows:

Sales - Variable costs - Fixed costs = Net Income

Since the sales figure and the related total variable costs are not available, you can adopt the following procedure:

1. Contribution per unit (Sales - variable cost per unit)
2. Total contribution is fixed costs + net income
3. Divide the total contribution by unit contribution and you get the number of units sold.

For 2009, you have to follow the same procedure except that the net income will be increased as provided for.