Question

Lin Corporation has a single product whose selling price is $140 per unit and whose variable expense is $70 per unit. The company's monthly fixed expense is $32,600. Required: 1. Calculate the unit sales needed to attain a target profit of $6,250. (Do not round intermediate calculations.) 2. Calculate the dollar sales needed to attain a target profit of $8,000. (Round your intermediate calculations to the nearest whole number.) 1. Units sales to attain target profit 2. Dollar sales to attain target profit

Answer 1

Given,

Selling price per unit = $140

Variable expense per unit =$70

Fixed monthly expenses =$32,600

NOTE: The calculated figures are per annum.

1. Unit sales required to attain a target profit of $6,250 per annum.

  Let the number of units be "x",

a. Sales = x * selling price = 140x

b. Variable cost for the entire sales = 70x

c. Fixed cost per annum = $32,600*12 = $391,200

d. Target profit for the annum = $6,250

From a,b, c and d ;

a = b+c+d

140x = 70x + 391,200 + 6250

70x = 397,450

x = 5,677.85714286 units

Therefore, the unit sales = 5,677.85714286 units ( Didn't rounded off)

2. Dollar sales for attaining a target profit of $8,000 is calculated as under:

Let the number of sale units be "x"

a. the Dollar sales required will be " x * selling price per unit" = 140x

b. Variable cost for entire sale is 70x

c. Fixed cost per annum =$391,200

d. Target profit per annum = $8,000

From a,b,c and d,

a = b+c+d

140x = 70x + 391,200 + 8,000

70x = 399,200

x= 5,702.85714286

Now Dollar sales for target profit = 140*x = 140 * 5,702.85714286 = $798,400

Therefore sales required = $798,400.