The following information is available for the 21,000 units of X Company's only product sold in 2019:
Selling price | $56.10 |
Variable costs per unit | $12.40 |
Total fixed costs | $420,000 |
Management believes it can increase the selling price in 2020 with no change in unit sales. Variable costs per unit and fixed costs would remain the same. What would the selling price have to be in 2020 in order for X Company's 2020 profit to be $622,125?
Answer:
i) Contribution = Fixed cost + Required profit
Contribution margin = $420,000 + $622,125
Contribution margin = $1,042,125
ii) Sales = Contribution margin + Variable cost
Sales = $1,042,125 + (21,000 units x $12.40)
Sales = $1,042,125 + $260,400
Sales = $1,302,525
iii) Selling price = Sales ÷ Number units to be sold
Selling price = $1,302,525/21,000 units
Selling price = $62.025
The following information is available for the 21,000 units of X Company's only product sold in...
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