Question

Brihon Corporation produces and sells a single product. Data concerning that product appear below: Selling price per unit Variable expense per unit Fixed expense per month $ 230.00 $ 103.50 $518,650 Required: a. Assume the company's monthly target profit is $12,650. Determine the unit sales to attain that target profit. b. Assume the company's monthly target profit is $63,250. Determine the dollar sales to attain that target profit.

Answer 1

Selling price per unit = $230

Variable cost per unit = $103.50

Contribution margin per unit = Selling price per unit – Variable cost per unit

= 230 - 103.50

= $126.50

Contribution margin ratio = Contribution margin per unit/Selling price per unit

= 126.50/230

= 55%

a)

Units to be sold to get a target profit = (Fixed cost + Target profit)/Contribution margin per unit

= (518,650 + 12,650)/126.50

= 531,300/126.50

= 4,200

b)

Dollar Sales to get a target profit = (Fixed cost + Target profit)/Contribution margin ratio

= (518,650 + 63,250)/55%

= 581,900/55%

= $1,058,000

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