a) 30,000 pairs:
Particulars | Calculation | $ |
Selling Price | 30,000 * 80 | 2,400,000 |
Less: Variable Costs | 30,000 * 40 | 1,200,000 |
Contribution Margin | 2,400,000-1,200,000 | 1,200,000 |
Less: Fixed Costs | Given | 960,000 |
Operating Profit | 1,200,000-960,000 | 240,000 |
b) Target Sales = (Fixed Costs - Target Operating Loss) / Contribution per unit
= (960,000 - 240,000) / (80 - 40)
= 720,000 / 40
= 18,000 units
c) Target Sales = (Fixed Costs + Target Operating Profit) / Contribution per unit
= (960,000 + 180,000) / (80 - 40)
= 1,140,000 / 40
= 28,500 units
d) 40,000 pairs:
Particulars | Calculation | $ |
Selling Price | 40,000 * 80 | 3,200,000 |
Less: Variable Costs | 40,000 * 40 | 1,600,000 |
Contribution Margin | 3,200,000-1,600,000 | 1,600,000 |
Less: Fixed Costs | Given | 960,000 |
Profit | 1,600,000-960,000 | 640,000 |
Less: Premium paid | (40,000-30,000) * 2 | 20,000 |
Operating Profit | 640,000-20,000 | 620,000 |
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