Casey Corporation is a manufacturing company that makes small electric motors it
ID: 2420929 • Letter: C
Question
Casey Corporation is a manufacturing company that makes small electric motors it sells for $25 per unit. The variable costs of production are $10 per motor, and annual fixed costs of production are $390,000. How many units of product must Casey make and sell to break even? How many units of product must Casey make and sell to earn a $114,000 profit? The marketing manager believes that sales would increase dramatically if the price were reduced to $20 per unit. How many units of product must Casey make and sell to earn a $114,000 profit, if the sales price is set at $20 per unit?Explanation / Answer
Casey Corporation CVP Analysis Details Amt $ Unit Sales price 25 Unit Variable cost 10 l Unit Contribution margin 15 m Contribution Margin % 60% n Total Fixed cost 390,000 BEP in Units=n/l= 26,000 a So Break even sales in units 26,000 o To Earn $114000 profit , the required contribution are ; Total Fixed cost 390,000 Required Profit 114,000 p Total Required contribution 504,000 b Units to be sold=p/l= 33,600 c when the unit selling price is 20 Details Amt $ Unit Sales price 20 Unit Variable cost 10 r Unit Contribution margin 10 Total Fixed cost 390,000 Required Profit 114,000 q Total Required contribution 504,000 c Units to be sold=q/r= 50,400