Question

# ABC Inc. manufactures and sells toys. Price and cost data are as follows: Selling price per...

ABC Inc. manufactures and sells toys. Price and cost data are as follows: Selling price per unit (package of 2 CDs)...................................... \$30.00 Variable costs per unit: Direct material............................................................................................................... \$5.00 Direct labor...................................................................................................................... \$6.00 Artist's royalties.............................................................................................................. \$5.50 Manufacturing overhead.......................................................................................... \$4.00 Selling expenses............................................................................................................ \$2.30 Total variable costs per unit............................................................ \$22.80 Annual fixed costs: Manufacturing overhead.......................................................................................... \$199,000 Selling and administrative....................................................................................... \$376,000 Total fixed costs................................................................................ \$575,000 Forecasted annual sales volume (120,000 units)......................... \$3,600,000 How many units would ABC Inc. have to sell in order to earn operating income of \$260,000?

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Answer #1

--Requirement asked, with calculations

 A Sale price per unit \$30.00 B Variable cost per unit \$22.80 C = A -B Contribution margin per unit \$7.20 D Total Fixed expenses \$575,000 E Total desired operating income \$260,000 F = D+E Total contribution margin required to be earned \$835,000 G = F/C Units to be sold to earn Operating Income of \$ 260000 115,972 unit [Answer]
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