Question

Exercise 18-14 (Part Level Submission)

Naylor Company had $152,000 of net income in 2016 when the selling price per unit was $154, the variable costs per unit were $94, and the fixed costs were $571,700. Management expects per unit data and total fixed costs to remain the same in 2017. The president of Naylor Company is under pressure from stockholders to increase net income by $64,100 in 2017.

Assume that Naylor Company sells the same number of units in 2017 as it did in 2016. What would the selling price have to be in order to reach the stockholders’ desired profit level? (Round answer to 2 decimal places, e.g. 12.25.)

Answer 1

Profit in 2016	152000
Desired profit increase	64100
Desired profit	216100
Units sold
Selling price	154
Variable cost	94
Contribution per unit	60
Fixed cost	571700
Net income	152000
Let units sold ="x"
So, 60x - 571700 = 152000
60x= 723700
x = 12061.67 or 12062 units
Since the sales units, variable cost per unit and fixed costs remain same
Assuming selling price required to generate the required profit of $216100 to be "y"
12062(y-60) - 571700 = 216100
12062y - 723720 - 571700 = 216100
12062 y = 2019140
y = $167.40
So, the selling price to achieve the profit of $216100 is $167.40