Question

Babymart, inc. manufactures baby cribs and currently has fixed costs of $50,000 and a sales price per unit of $315. babymart is expecting the variable costs of its baby cribs to increase from $90 to $115 due to an increase in prices by one of the company's major raw materials suppliers. babymart plans to cut fixed costs by $5,000 but is going to hold the line on the selling price of its cribs. babymart currently has monthly net income of $40,000 on sales of 400 cribs. to maintain the same level of income, babymart will need to sell an additional ________ units per month.

Answer 1

The additional number of units babymart needs to sell to maintain the same level of income is 25 units.

• The fixed cost = $50,000 - $5,000 = $45,000
• The total revenue = $315
• The variable cost = $115
• Let X represents the additional number of unit

Further Explanation

Therefore,

The total revenue = $115 × x

The variable cost = $ 315 × X

To determine the Net income, we have to subtract the total revenues from the total expenses. This can be expressed as:

Net income = Total revenue – Total expenses

If we substitute the above value, then we have

Recall, net income = 40,000, therefore we have:

40,000 = (315 × x) – 45,000 – (115X)

40,000 + 45,000 = (315 × X) (115 × X)

85,000 = (315x) – (115x)

85000 = 200X (divide both side by 200)

85,000 / 200 = 200X / 200

425 = X

X = 425

Therefore, we have to subtract the derived value from the monthly sale (400) cribs

Thus, 425 – 400

= 25.

Therefore, the additional number of units babymart needs to sell to maintain the same level of income is 25 units.

LEARN MORE:

• Babymart, inc. manufactures baby cribs and currently has fixed costs of $50,000 and a sales price per unit of $315. brainly.com/question/13665184
• Babymart, inc. manufactures baby cribs and currently has fixed costs of $50,000 and a sales price per unit of $315. brainly.com/question/13665184

KEYWORDS:

• babymart inc
• baby cribs
• variable cost
• total cost
• fixed costs
• raw materials

Answer 2

Let the additional number of units, babymart need to sell be x, then

Revenue = $315(400 + x)

New fixed cost = $50,000 - $5,000 = $45,000

Thus, Total cost = $115(400 + x) + $45,000

Net income = Revenue - Total cost = 315(400 + x) - 115(400 + x) - 45,000 = 40,000

⇒ 200(400 + x) = 40,000 + 45,000
⇒ 80,000 + 200x = 85,000
⇒ 200x = 85,000 - 80,000 = 5,000
⇒ x = 5,000 / 200 = 25

Therefore, the additional number of units babymart needs to sell to maintain the same level of income is 25 units.