Question

Lin Corporation has a single product whose selling price is $130 per unit and whose variable expense is $65 per unit. The company’s monthly fixed expense is $32,150. Required: 1. Calculate the unit sales needed to attain a target profit of $2,300. (Do not round intermediate calculations.) 2. Calculate the dollar sales needed to attain a target profit of $8,900. (Round your intermediate calculations to the nearest whole number.)

Answer 1

Answer:

1.- selling 530 units will achieve 2,300 operating profit

2.- sales for $82,100 will achieve 8,900 operating profit

Explanation:

sale price 130

variable 65

contribution margin 65

$\frac{Fixed\:Cost + Target \: Profit }{Contribution \:Margin} = Units\: to\: Profit$

(32150 + 2,300) /65 = 530 units

$\frac{Fixed\:Cost}{Contribution \:Margin \:Ratio} = Sales\: To\: Profit$

$\frac{Contribution \: Margin}{Sales \: Revenue} = Contribution \: Margin \: Ratio$

65/130 = 0.5

(32,150 + 8,900) / 0.5 = 82,100