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Pseudonym · Feb 15, 2008, 02:48 AM

Q. For Biswell Company, variable costs are 75% of sales, and fixed costs are $ 180,000. Management's net income goal is $ 60,000. Compute the required sales in dollars needed to achieve management's target net income of $60,000.

A. Finding the sales in dollars was easy. CM percentage = 100% - 75% = 25%

Sales = (180,000 + 60,000) / 0.25
= $ 960,000

now our professor asked us to find the unit sales, i.e. quantity, using the information given above. I have no idea how to go about it. Any help would be appreciated.
p.s. I'm not even sure if we can find the quantity with the information provided, so maybe the professor was just testing us :S

morgaine300 · Feb 15, 2008, 02:36 PM

There is no answer. Let's say the sales price is $100. That means you sold 9600 units. That'll get you 960,000 in sales. That also makes variable $75 and CM $25. And everything works out. But now let's say the sales price is $1000. That means you sold 960 units. And variable is now $750 and CM is $250. There's just two examples right there that make the numbers work.

You could keep making any combination of stuff out of this. Without at least one thing, i.e. a sales price per unit or something, it could be anything. So either there was information hiding in there that you missed or your professor is a little snot. Does he realize how much time students will waste on this, ripping their hair out, thinking they're stupid and don't understand something, when all the time it just can't be solved? I don't think he realizes what this does to students, especially ones who already have anxiety about school. "Playing around" with them for maybe 5 minutes is one thing, but this is ridiculous. That might not be particularly professional of me to say, but some professors just make me nuts.

Pseudonym · Feb 16, 2008, 12:11 AM

Thank you so much for dropping by! Your examples made sense, and I had a feeling there was no 'right' answer to this question.

Originally Posted by morgaine300

So either there was information hiding in there that you missed or your professor is a little snot. Does he realize how much time students will waste on this, ripping their hair out, thinking they're stupid and don't understand something, when all the time it just can't be solved? I don't think he realizes what this does to students, especially ones who already have anxiety about school. "Playing around" with them for maybe 5 minutes is one thing, but this is ridiculous. That might not be particularly professional of me to say, but some professors just make me nuts.

I typed out the question from the book and solved what it had asked us to find (the sales in dollars). The professor made up the next bit about finding the unit sales, and it really did make me tear my hair out in frustration. I checked two different books for a formula or way to find the unit sales with the given information, obviously with no luck.

Thanks again :)