Question

Blanchard Company manufactures a single product that sells for $180 per unit and whose total variable costs are $135 per unit. The company s annual fixed costs are $562,500. Management targets an annual pretax income of $1,012,500. Assume that fixed costs remain at $562,500. Compute the (1) Unit sales to earn the target income and (2) Dollar sales to earn the target income.

Answer 1

Answer:

1.$35,000

2.$6,300,000

Explanation:

The computation of Unit sales to earn the target income and Sales amount at required profit is given below:-

a. Contribution per unit = Unit sale price - Unit variable cost

= $180 - $135

= $45

Unit sales at required profit = (Sales cost + Required cost) ÷ Contribution per unit

= ($562,500 + $1,012,500) ÷ $45

= $1,575,000 ÷ $45

= $35,000

b. Sales amount at required profit = Unit sales at required profit × Unit sale price

= $35,000 × $180

= $6,300,000