Question

Warbler Gift's reported the following information for the sales of their single product: Total Per Unit Sales $ 300,000 $ 10 Variable expenses 180,000 6 Contribution margin 120,000 $ 4 Fixed expenses 100,000 Net operating income $ 20,000 Warbler's salesmen have proposed to decrease the selling price by 50 cents per unit. How many units will need to be sold for Warbler to earn at least the same net operating income

Answer 1

Answer: Requitred units =34,285.7 units

Explanation:

GIVEN

                                     Total          Per Unit Sales

                                   $ 300,000   $ 10

Variable expenses   180,000       $6

Contribution margin 120,000       $ 4

Fixed expenses        100,000

Net operating income $ 20,000

New selling price=Old price - prosed price

=$10-$0.5  =  $9.5

Revised contribution margin=  Selling price-Variable costs

= $9.5-$6=$3.5

Proposed Contribution margin=Net operating income + Fixed expenses.

=(100,000 +20,000)= $120,000

Required units to be sold=Proposed Contribution margin/Contribution margin per unit

= $120,000/$3.5

=34,285.7 units