Question

Ivanhoe Company had $164,500 of net income in 2019 when the selling price per unit was...

Ivanhoe Company had $164,500 of net income in 2019 when the selling price per unit was $153, the variable costs per unit were $93, and the fixed costs were $573,500. Management expects per unit data and total fixed costs to remain the same in 2020. The president of Ivanhoe Company is under pressure from stockholders to increase net income by $36,900 in 2020.

Units sold in 2019 - 12300

Units needed to be sold in 2020 to reach stockholder's desired profit levels - 12915

Assume that Ivanhoe Company sells the same number of units in 2020 as it did in 2019. What would the selling price have to be in order to reach the stockholders’ desired profit level?

New selling price $
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Answer #1
Answer:
Break even Units =       (Fixed cost + Net income + Increse in income)/ Contribution margin
     12,300 Units =        ( $ 573,500 + $ 164,500 + $ 36,900 ) / (Selling Price (-) $ 93)
(Selling Price (-) $ 93) = $ 774,900 / 12,300 Units
(Selling Price (-) $ 93)   =     $ 63
New Selling Price           =    $ 63 + $ 93 = $ 156
New Selling Price =   $ 156
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