Answer:
The correct answer for option (a) is $10.96 and for option (b) is 7,128 units.
Explanation:
According to the scenario, the computation of the given data are as follows:
contribution margin ratio = 27%
Variable expense = $8 per unit
Fixed expense = $13,000
(A) We can calculate the selling price as follows:
Contribution margin ratio = 100 % - Variable expense ratio
= 27% = 100% - Variable expense ratio
= Variable expense ratio = 100% - 27% = 73%
So, Selling price = Variable expense ÷ Variable expense ratio
= $8 ÷ 73%
= $10.96
(b). Profit = $8,100
Contribution margin = Selling price - Variable expense = $10.96 - $8 = $2.96
So. we can calculate the number of units by using following formula:
Number of units required = (Fixed cost + Profit) ÷ Contribution Margin
= ( $13,000 + $8,100 ) ÷ $2.96
= $21,100 ÷ $2.96
= 7,128.38 units
