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Net Income Planning Nolden Company has charged a selling price of $20 per unit, incurred variable...

Net Income Planning Nolden Company has charged a selling price of $20 per unit, incurred variable costs of $14 per unit, and total fixed costs of $90,000. What unit sales volume is necessary to earn the following related amounts of net income before income tax? (a) $18,000; (b) $27,000; or (c) equal to 20% of sales revenue

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Homework Answers

Answer #1

Contribution margin=Sales-Variable costs

=(20-14)=$6 per unit

1.Target Contribution margin=Fixed costs+Target profits

=(90000+18000)=$108000

Hence units to be sold=(108000/6)=18000 units.

2.Target Contribution margin=Fixed costs+Target profits

=(90000+27000)=$117000

Hence units to be sold=(117000/6)=19500 units.

3.Let units sold be x

Hence total sales=20x

Hence required profit=(20%*20x)=$4x

Target Contribution margin=90000+4x

Hence

6x=90000+4x

Hence x=90000/(6-4)

=45000 units.

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