Question

Question 4 of 4 4.16/6.25 View Policies Show Attempt History Current Attempt in Progress Three years ago, Mary Smith started a business that creates and delivers holiday and birthday gift baskets to students at the local university. Mary sells the baskets for $25 each, and her variable costs are $15 per basket. She incurs $10,000 in fixed costs each year. (a) Your answer is correct. How many baskets will Mary have to sell this year if she wants to earn $28,000 in operating income? (Round answer to decimal places, e.g. 5,275.) 3800 baskets e Textbook and Media Attempts: 2 of 12 used

Answer 1

a. Sales price = $25

Variable Costs =$15

Contribution margin per unit = $10

Fixed Cost = $10000

Operating Income required = $28000

Required Contribution margin = $38000

Units to be sold = $38000/ $10 = 3800

b. Operating Income required = $28000

Fixed Costs = $10000

Required Contribution margin = $38000

Units Sold = 4000

Contribution margin per unit = $9.5 per unit

			Calculations
1	Raise selling price per unit to	$24.5	$15 + $9.5
2	Reduce variable costs per unit to	$15.5	$25 - $9.5
3	Reduce fixed costs to	$12000	[($25-$15) *4000]- $28000