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Blanchard Company manufactures a single product that sells for $208 per unit and whose total variable...

Blanchard Company manufactures a single product that sells for $208 per unit and whose total variable costs are $156 per unit. The company’s annual fixed costs are $806,000. Management targets an annual pretax income of $1,300,000. Assume that fixed costs remain at $806,000.

(1) Compute the unit sales to earn the target income.
Choose Numerator: / Choose Denominator: = Units to Achieve Target
/ = Units to achieve target
(2) Compute the dollar sales to earn the target income.
Choose Numerator: / Choose Denominator: = Dollars to Achieve Target
/ = Dollars to achieve target
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Answer #1
(1) Compute the unit sales to earn the target income.
Choose Numerator: / Choose Denominator: = Units to Achieve Target
(Fixed cost+Target income) / Contribution margin per unit = Units to achieve target
(806000+1300000) / (208-156) = 40500 Units
(2) Compute the dollar sales to earn the target income.
Choose Numerator: / Choose Denominator: = Dollars to Achieve Target
(Fixed cost+Target income) / Contribution margin Ratio = Dollars to achieve target
(806000+1300000) / 0.25 = $8424000

Contribution margin ratio = 52/208 = 25%
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