Question

Lin Corporation has a single product whose selling price is $130 per unit and whose variable expense is $65 per unit. The company’s monthly fixed expense is $32,150.

Required:

1. Calculate the unit sales needed to attain a target profit of $2,300. (Do not round intermediate calculations.)

2. Calculate the dollar sales needed to attain a target profit of $8,900. (Round your intermediate calculations to the nearest whole number.)

Answer 1

Requirement 1:-

In order to attain a target profit of $2,300:-

Unit Sales = (Target Profit + Fixed Expenses)/(Selling price per unit - Variable expense per unit)

Unit Sales = ($2,300 + $32,150) / ($130 - $65)

Unit Sales to attain target profit = 530 units

Requirements 2:-

In order to attain a target profit of $8,900

Unit Sales = (Target Profit + Fixed Expenses)/($130 - $65)

Contribution Margin Ratio = ($130 - $65)/$130

Contribution Margin Ratio = $65/$130

Contribution Margin Ratio

Dollar Sales = ($8,900 + $32,150)/50%

Dollar Sales = $82,100

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Unit Sales