Question

! Required information [The following information applies to the questions displayed below.] Adams Company makes and sells products with variable costs of $24 each. Adams incurs annual fixed costs of $321,280. The current sales price is $88. Note: The requirements of this question are interdependent. For example, the $256,000 desired profit introduced in Requirement c also applies to subsequent requirements. Likewise, the $80 sales price introduced in Requirement d applies to the subsequent requirements. c. Suppose that Adams desires to earn a $256,000 profit. Determine the sales volume in units and dollars required to earn the desired profit. Prepare an income statement using the contribution margin format. Complete this question by entering your answers in the tabs below. Req C1 Req C2 Suppose that Adams desires to earn a $256,000 profit. Determine the sales volume in units and dollars required to earn the desired profit. (Do not round intermediate calculations. Round your final answers to the nearest dollar and round units up to the next whole unit.) Sales volume in units Sales volume in dollars Reg C1 Req C2 >

Answer 1

Req C1

Contribution margin per unit = Sales price per unit - Variable costs per unit

= $88 - $24

= $64

Sales volume in units = (Fixed costs + Desired profit) / Contribution margin per unit

= ($321,280 + $256,000) / $64

= 9,020 units

Sales volume in dollars = 9,020 units * $88 per unit

= $793,760

Req C2

ADAMS COMPANY

Income Statement

Sales	$793,760
Less : Variable costs	$216,480 (9,020*$24)
Contribution margin	$577,280
Less : Fixed costs	$321,280
Operating income	$256,000