Question

Comfort Bach Inc.

Comfort Bach Inc. produces office chairs for the US markets. The price of the chair is $109.75 and the variable cost per chair is $49.75. The following fixed costs are incurred:

Depreciation of plant and equipment per year $20,000

Property taxes per year $22,000

Manager's salary and fringe benefits per month are $4,200

Comfort Bach Inc.

Utilizing the information from the previous question above, how many chairs must be sold for the company to make a net profit of $75,000 in a year (ROUND UP NUMBER OF CHAIRS)?

A 1,250

B 2,957

C 2,283

D 2,790

Answer 1

Answer: D 2790

Number of chairs = (Fixed costs+ Target Profit) / (Selling Price per unit - Variable Cost per unit)

Fixed cost = 20000+22000+(4200*12)

                 = 92400

Number of chairs = (92400+75000)/109.75-49.75

                          = 167400/60

                          = 2790