Question

Vaughn report the Following results from the sale of 5000 units in May sales of 390000 variable cost $270,000 fixed cost $90,000 and net income 30,000 assume that Vaughn increase the sales price by 5% on June 1st how many units will have to be sold in June to maintain the same level of net income

Answer 1

Solution :

Units to be Sold to earn Same level of profit = (Fixed Cost + Desired Profit) / Contribution per Unit

= ($ 90,000 + $ 30,000) / $ 27.90

= $ 120,000 / $ 27.90

= 4301 Units (rounded off to the nearest)

4,301 Units have to be sold to earn the same level of  profit.

Working :

(a) Units Sold in May	5,000
(b) Total Sales Value	$ 390,000
(c) Sales Price per Unit (b / c)	$ 78
(d) Total Variable Cost	$ 270,000
(e) Variable Cost per Unit (d / a)	$ 54
(f) Revised Sales price per Unit for June (c * 1.05)	$ 81.90
(g) Contribution per Unit for June (f - e)	$ 27.90

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