Question

The Saunders Company is trying to do some planning for the coming month. The following information...

The Saunders Company is trying to do some planning for the coming month. The following information was gathered from the last month.

Sales revenue $300,000
Fixed manufacturing expenses    110,000
Fixed marketing expenses 20,000
Fixed administrative expenses 18,500
Sales price $20/unit
Variable manufacturing costs $7/unit
Variable marketing costs $2/unit

If Saunders wants to earn operating income of $44,000 next month, how many units must be sold?

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Answer #1

Calculate required unit Sales :

Fixed Cost = 110000+20000+18500 = $148500

Variable cost per unit = 7+2 = $9 per unit

Required unit sales = (Fixed cost+desired profit)/Sale price per unit-Variable cost per unit

= (148500+44000)/(20-9)

Required unit sales = 17500 Units

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