Question

Problems Problem 1 - 20 points Holder Manufacturing had $125.000 of net income in 2012 when the selling price per unit was $100, the variable costs per unit were $70, and the fixed costs were $475,000. Management expects per unit data and total fixed costs to remain the same in 2013. The president of Holder Manufacturing is under pressure from stockholders to increase net income by $60,000 in 2013. Instructions (a) Compute the number of units sold in 2012 (b) Compute the number of units that would have to be sold in 2013 to reach the stockholders' desired profit level. (C) Assume that Holder Manufacturing sells the same number of units in 2013 as it did in 2012. What would the selling price have to be in order to reach the stockholders' desired profit level

Answer 1

a.	Net Income for 2012	$1,25,000
	Add:Fixed costs	$4,75,000
	Contribution margin for 2012	$6,00,000
	Selling price per unit	$100
	Variable cost per unit	$70
	Contribution margin per unit	$30
	No. of units sold in 2012($600,000/$30)	20000	units
b.	Desired Net Inocme for 2013($125,000+$30,000)	$1,85,000
	Add:Fixed costs	$4,75,000
	Contribution margin for 2013	$6,60,000
	Selling price per unit	$100
	Variable cost per unit	$70
	Contribution margin per unit	$30
	No. of units sold in 2013($660,000/$30)	22000	units
c	No. of units sold in 2013	20000	units
	Required Contribution for 2013	$6,60,000
	Required contribution per unit($660,000/20,000 units)	$33
	Sales price per unit($33/0.30)	$110