Simple Metal Works, Inc. will manufacture and sell 200,000 units next year. Fixed costs will total...
Simple Metal Works, Inc. will manufacture and sell 200,000 units next year. Fixed costs will total $330,000,and variable costs will be 50 percent of sales.
a. The firm wants to achieve a level of earnings before interest and taxes of $250,000. What selling price per unit is necessary to achieve this result?
b. Set up an analytical income statement to verify your solution to part (a).
Homework Answers
What selling price per unit is necessary to achieve this result?
Desired profit + Total cost =Total sales value
Total cost=fixed cost+ variable cost
$250000+330000+50% of Total sales value=Total Sales value
$580,000=Total Sales value - .50 of Total sales value
Total Sales value=580,000/.50=$116000
selling price per unit =$116000/200000=$5.8 per unit
Set up an analytical income statement to verify your solution to part (a).
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