Question

Lin Corporation has a single product whose selling price is $120 and whose variable expense is $80 per unit. The company's monthly fixed expense is $50,000.
Requirement 1:
Using the equation method, solve for the unit sales that are required to earn a target profit of $10,000.

unit sales: ???

Requirement 2:
Using the formula method, solve for the unit sales that are required to earn a target profit of $15,000.

Units sold to attain the target profit: ???

Answer 1

Answer:

See below.

Explanation:

The formula to calculate target profit is as follows,

Target sales = Fixed costs + Target profit / contribution per unit.

Contribution = 120 - 80 = $40

For 10,000 in profits,

Target units = (50000+10000)/40

Target units = 1500 units

For 15000 in profits,

Target units = (50000+15000)/40

Target units = 1625 units

Hope that helps.