A.
Net Loss = $100,000
Selling price per unit = $15
Variable cost per unit = $10
Fixed cost = $200,000
Let the number of units sold in 2011 = Y
Sales = Number of units sold x Selling price per unit
= 15Y
Loss = Sales - Variable cost - Fixed cost
-100,000 = 15Y - 10Y - 200,000
5Y = 100,000
Y = 20,000
Number of units sold in 2011 = 20,000
B.
Contribution margin per unit = Selling price per unit - Variable cost per unit
= 15-10
= $5
Number of units to be sold to earn target profit = ( Fixed cost + Target profit) /Contribution margin per unit
= ( 200,000 + 50,000)/5
= 250,000/5
= 50,000 units
Hence, in 2012, 50,000 units must be sold to earn net income of $50,000.
C.
At 50% capacity, the number of units sold was 20,000.
Hence at 100% capacity, the number of units sold is = 20,000 x 2
= 40,000
Thus, 50,000 units are beyond the optimum production capacity of 40,000 units
Thus it is not feasible that Choco Heaven might achieve its goal.
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7. Choco Heaven had a net loss of $100,000 in 2011 when the selling price per...
7. Choco Heaven had a net loss of $100,000 in 2011 when the selling price per unit was $15, the variable costs per unit were $10, and the fixed costs were $200,000. Management expects per unit data and total fixed costs to be the same in 2012. Management has set a goal of earning net income of $50,000 in 2012. Choco Heaven is operating at 50 % of capacity. Instructions How many units did Choco Heaven sell in 2011? How...
7. Choco Heaven had a net loss of $100,000 in 2011 when the selling price per unit was $15, the variable costs per unit were $10, and the fixed costs were $200,000. Management expects per unit data and total fixed costs to be the same in 2012. Management has set a goal of earning net income of $50,000 in 2012. Choco Heaven is operating at 50% of capacity. Instructions A. How many units did Choco Heaven sell in 2011? B....
7. Choco Heaven had a net loss of $100,000 in 2011 when the selling price per unit was $15, the variable costs per unit were $10, and the fixed costs were $200,000. Management expects per unit data and total fixed costs to be the same in 2012. Management has set a goal of earning net income of $50,000 in 2012. Choco Heaven is operating at 50% of capacity. Instructions A. How many units did Choco Heaven sell in 2011? B....
7. Choco Heaven had a net loss of $100,000 in 2011 when the selling price per unit was $15, the variable costs per unit were $10, and the fixed costs were $200,000. Management expects per unit data and total fixed costs to be the same in 2012. Management has set a goal of earning net income of $50,000 in 2012. Choco Heaven is operating at 50% of capacity. Instructions A. How many units did Choco Heaven sell in 2011? B....
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