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    andrep's Avatar
    andrep Posts: 1, Reputation: 1
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    #1

    Mar 27, 2007, 07:43 AM
    Manegrial Accounting
    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's Avatar
    avenger9000 Posts: 99, Reputation: 2
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    #2

    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's Avatar
    CaptainForest Posts: 3,645, Reputation: 393
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    #3

    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.
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