Question

Exercise 18-14 (Part Level Submission) Naylor Company had $154,200 of net income in 2016 when the selling price per unit was $155, the variable costs per unit were $95, and the fixed costs were $572,900. 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 $61,200 in 2017. Collapse question part (a) Correct answer. Your answer is correct. Compute the number of units sold in 2016. (Round answer to 0 decimal places, e.g. 1,225.) Entry field with correct answer units Click if you would like to Show Work for this question: Open Show Work SHOW SOLUTION SHOW ANSWER LINK TO TEXT LINK TO TEXT Attempts: 1 of 3 used Collapse question part (b) Correct answer. Your answer is correct. Compute the number of units that would have to be sold in 2017 to reach the stockholders’ desired profit level. Entry field with correct answer units Click if you would like to Show Work for this question: Open Show Work SHOW SOLUTION SHOW ANSWER LINK TO TEXT LINK TO TEXT Attempts: 1 of 3 used Collapse question part (c) 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.) New selling price $ Click if you would like to Show Work for this question: Open Show Work

PLEASE SOLVE FOR PART C. I'VE ALREADY SOLVED FOR A AND B.

Answer 1

Answer c.

2016:

Net Income = $154,200
Fixed Expenses = $572,900
Variable Cost per unit = $95
Selling Price per unit = $155

Contribution Margin per unit = Selling Price per unit - Variable Cost per unit
Contribution Margin per unit = $155 - $95
Contribution Margin per unit = $60

Number of units sold = (Fixed Expenses + Net Income) / Contribution Margin per unit
Number of units sold = ($572,900 + $154,200) / $60
Number of units sold = $727,100 / $60
Number of units sold = 12,118

2017:

Desired Profit = $154,200 + $61,200
Desired Profit = $215,400

Fixed Expenses = $572,900
Variable Cost per unit = $95
Number of units sold = 12,118

Let new selling price be $x

Number of units sold = (Fixed Expenses + Net Income) / Contribution Margin per unit
12,118 = ($572,900 + $215,400) / ($x - $95)
12,118 = $788,300 / ($x - $95)
$x - $95 = $65.05
$x = $160.05

So, new selling price is $160.05