Question

Exercise 18-12 Computing sales to achieve target income LO C2 Blanchard Company manufactures a single product that sells for $100 per unit and whose total variable costs are 576 per unit. The company's annual fixed costs are $338.400. Management targets an annual pretax income of $600,000. Assume that foxed costs remain at $338,400. (1) Compute the unit sales to earn the target Income Choose Numerator: Choose Denominator: - = Units to Achieve Target Units to achieve target (2) Compute the dollar sales to earn the target income. Choose Numerator Choose Denominator: - Dollars to Achieve Target Dollars to achieve target

Answer 1

1) I (Fixed Costs ($338,400 + + Target Profit) $600,000) Contribution Margin Per Unit $24 = Units to Achieve Target = 39,100 units [($338400 + $600000) / $24] Workings: $100 Selling price per unit Less: Variable expense per unit Contribution margin per unit $76 $24 ($100 - $76] 2) (Fixed Costs ($338,400 + + Target Profit) $600,000) Contribution Margin Ratio 0.24 L Dollars To Achieve Target $3,910,000 [($338400 + $600000) / 0.24] Workings: Contribution margin per unit Selling price per unit Contribution margin ratio $24 [As calculated in Part-1] $100 0.24 ($24/ $100]