Question

I am having trouble with a Cybertext problem in the Cost Volume Relationships - Profit Planning section.

It reads: For 20x2 the selling price per lamp will be $45. The company would like to have a operating income equal to 31% of sales. If that is to be achieved, what would be the sales in units in 20x2?

There's no other data given. From previous problems:

Fixed Costs: $380,000,

Contribution Margin per Unit is 21.7018250

Variable Cost per Unit: $23.2981750

Answer 1

Profit per unit to earn 31% profiit = $45 * 31% = $13.95

Units to be sold to earn profit of 31% of sales = Fixed cost / (Contribution per unit - Profit per unit needed)  

= $3,80,000 /(21.702 - 13.95)

= $3,80,000 /(7.752)

= 49,029 units

Reconciliation

	49020 units
Sales	$        2,205,900
Variable Cost	$        1,142,068
Contribution	$        1,063,832
Fixed Cost	$            380,000
Operating Income	$            683,832
Operating Margin	31%