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nikklg [1K]
3 years ago
15

Sam's Dog toys sells a Red toy and a Blue toy. The contribution margin for the Red toy is $5 and for the Blue toy is $10. The ex

pected sales mix is 60% for Red toy and 40% for Blue toy. The total fixed costs amount to $3,000 and the company desires to earn a profit of $500. What is the sale volume in units necessary to reach the desired profit
Business
1 answer:
DENIUS [597]3 years ago
8 0

Answer:

500 units

Explanation:

The computation of the sales units in volume to achieve the desired profit is shown below:

= (Fixed cost + target profit) ÷ (contribution margin per unit)

= ($3,000 + $500) ÷ ($5 × 60% + $10 × 40%)

= $3,500 ÷ 7

= 500 units

Hence, the sales units in volume to achieve the desired profit is 500 units

The above formula should be applied to determine the sales units

hence, the same would be considered

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<u>Favourable Changes:</u>

Sales

Gross Profit

Operating Income

Interest Expense

Net Income

<u>Unfavourable Changes:</u>

Cost Of Sales  

Selling Expenses  

General Expenses

Other Revenue

Income Taxes

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Observe Movement from 2018 results to 2019 results

                                        Erie Corp

                   Vertical Analysis of Income Statement

                                                                2019                    2018

Sales                                                        1,397                    1,122

Less Cost Of Sales                                   935                      814

Gross Profit                                               462                      308

<u>Less Operating Expenses</u>

Selling Expenses                                      154                       121

General Expenses                                     88                        77

Operating Income                                   220                       110

<u>Less Non- Operating Expenses</u>

Other Revenue                                            4                          7

Interest Expense                                         2                          9

Income Taxes                                           134                        66

Net Income                                                88                        42

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