Question

Exercise 18-12 Computing sales to achieve target income LO C2 Blanchard Company manufactures a single product that sells for $310 per unit and whose total variable costs are $248 per unit. The company’s annual fixed costs are $992,000. Management targets an annual pretax income of $1,550,000. Assume that fixed costs remain at $992,000. Compute the unit sales to earn the target income.

Answer 1

Answer:

The unit sales to earn the target income is 9,000 units

Explanation:

Annual income=Total sales-total expenses

where;

Annual income=$1,550,000

Total sales=Cost per unit sales×number of units sold (n)=(310×n)=310 n

Total expenses=Variable cost+annual fixed cost

Total expenses=(248×n)+992,000

Total expenses=248 n+992,000

Replacing;

1,550,000=310 n-(248 n+992,000)

1,550,000=310 n-248 n-992,000

310 n-248 n=1,550,000-992,000

62 n=558,000

n=558,000/62

n=$9,000

The unit sales to earn the target income is 9,000 units