Question

8 pt In 2019. X Company sold 5.300 units of its only product. Total revenue was $1,379,060, total variable costs were $586,710, and total fixed costs were $593,000. In 2020, there are only two expected changes: variable costs will decrease by 4.70 per unit, and fixed costs will decrease by $23,700. How many units must X Company sell in 2020 in order to em $38,000? 7. AO 2,716 BO 3,938 CO 5,711 DO 8,280 EO 12,007 FO 17,410

Answer 1

For 2019

Number of units sold = 5,300

Sales revenue = $1,379,060

Selling price per unit = Sales revenue / Number of units sold

= 1,379,060/5,300

= $260.2

Total variable cost = $586,710

Variable cost per unit = Total variable cost/Number of units

= 586,710/5,300

= $110.7

Fixed cost = $593,000

In 2020

Decrease in variable cost = $4.70 per unit

Variable cost per unit = 110.7-4.7

= $106

Decrease in fixed cost = $23,700

Fixed cost = 593,000-23,700

= $569,300

Target income = $38,000

contribution margin per unit = Selling price per unit - Variable cost per unit

= 260.2-106

= $154.2

Number of units to be sold to earn target income = ( Fixed cost + Target income )/ Contribution margin per unit

= (569,300+38,000)/154.20

= 3,938 units

Correct option is B.

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