Question

The following data pertains to AAA division of JJJ Company. ? ? ? Selling price per unit $15 Variable cost per unit $7 Total fixed costs $100,000 Total investment of AAA division $200,000 5) Given: ? ??? a) the minimum desired return on investment equals to 20% ??? b) the estimated residual income 15,000 ? ? What are sales, in units? ?

1. between 19,000 and 19,500

2. between 12,000 and 12,500

3. between 10,000 and 10,500

4. between 1,000 and 4,500

Answer 1

Correct answer is

1. Between 19,000 and 19,500 units

Working :

Selling Price por unit variable Cost per unit Contribution = $15 = 87 & 8 Fixed Cost = $ 100,000 I Total Investment = $200,000 Return of Investment = 20% Return - 200,000 x 20% = $40,000 Add : Residual Income = $ 15,000 - Net Income - $55,000 Add : Fixed cost - = $ 100,000 Total contribution = $ 155,000 Contribution per Unit = 8 No. of Units to be sold = 165000 19375 units.