Question

Required information [The following information applies to the questions displayed below.) RayLok Incorporated has invented a secret process to improve light intensity and, as a result, manufactures a variety of products related to this process. Each product is independent of the others and is treated as a separate profit/loss division. Product (division) managers have a great deal of freedom to manage their divisions as they think best. Failure to produce target divisional income is dealt with severely; however, rewards for exceeding one's profit objective are, as one division manager described them, lavish. The DimLok Division sells an add-on automotive accessory that automatically dims a vehicle's headlights by sensing a certain intensity of light coming from a specific direction. DimLok has had a new manager in each of the 3 previous years because each manager failed to reach RayLok’s target profit level. Donna Barnes has just been promoted to manager and is studying ways to meet the current target profit for DimLok. DimLok's two profit targets for the coming year are $1,200,000 (20% return on the investment in the annual fixed costs of the division) and $20 (pre-tax) profit for each DimLok unit sold. Other constraints on the division's operations are as follows: • Production cannot exceed sales because RayLok's corporate advertising program stresses completely new product models each year, although the models might have only cosmetic changes. • DimLok's selling price cannot vary above the current selling price of $240 per unit but may vary as much as 10% below $240. • A division manager can elect to expand fixed production or selling facilities; however, the target profit objective related to fixed costs is increased by 20% of the cost of any such expansion. Furthermore, a manager cannot expand fixed facilities by more than 30% of existing fixed cost levels without approval from the board of directors.
I need answer for question 2

Answer 1

Answer with working notes is given below

Answer is 89,080 Revised Fixed cost Existing Fixed Cost Increase in Fixed cost Revised Fixed cost Profit at 20% on above Total Target needed $6,000,000 $1,090,000 $7,090,000 $1,418,000 $8,508,000 Considering all constraints First 49,000 Units $240 $120 $120 -69,000 units $220 In excess of 69,000 units $220 $100 Selling price Variable cost Contribution per unit $120 $20 $100 Profit per bike Revised Contribution per bike Units Total Contribution $20 $100 49,000 $4,900,000 $20 $80 20,000 $1,600,000 Balance Contribution (A-B-C) Units to achieve above contribution $2,008,000 A-B-C 20,080 First Slab Second Slab Third Slab Total Units to achieve profit objective Units 49,000 20,000 20,080 89,080