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 $32,550.

Required:

1. Calculate the unit sales needed to attain a target profit of $3,850.

2. Calculate the dollar sales needed to attain a target profit of $8,100. (Round your answer to the nearest whole number.)

Answer 1

• Working

A	Selling Price	$130	per unit
B	Variable Expenses	$65	per unit
C = A - B	Contribution margin	$65	per unit
D =(C/A) x 100	Contribution margin ratio	50%

• Requirement 1

A	Total Fixed expenses	$32,550
B	Target Profits	$3,850
C = A+B	Total Contribution margin required	$36,400
D	Contribution margin per unit	$65
E = C/D	Unit sales needed to attain target profit	560 units = Answer

• Requirement 2

A	Total Fixed expenses	$32,550
B	Target Profits	$8,100
C = A+B	Total Contribution margin required	$40,650
D	Contribution margin ratio	50%
E = C/D	Dollar sales needed to attain target profit	$81,300 = Answer