Question

Brihon Corporation produces and sells a single product. Data concerning that product appear below: Selling price per unit $ 230.00 Variable expense per unit $ 103.50 Fixed expense per month $ 518,650

Required: a. Assume the company's monthly target profit is $12,650. Determine the unit sales to attain that target profit. b. Assume the company's monthly target profit is $63,250. Determine the dollar sales to attain that target profit.

Answer 1

Contribution margin per unit = Selling price per unit - Variable expense per unit

= $230 - $103.5

= $126.5

Contribution margin ratio = Contribution margin per unit / Selling price per unit

= $126.5 / $230

= 55%

a.

Unit sales needed = (Fixed expenses + Target profit) / Contribution margin per unit

= ($518,650 + $12,650) / $126.5

= 4,200 units

b.

Dollar sales needed = (Fixed expenses + Target profit) / Contribution margin ratio

= ($518,650 + $63,250) / 55%

= $1,058,000