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Ch 5: E 5,6,7
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Exercise 5-7 Compute the Level of Sales Required to Attain a Target Profit [LO5-6]
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Lin Corporation has a single product whose selling price is $135 and whose variable expense is $54 per unit. The company’s monthly fixed expense is $40,280.
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Section BreakExercise 5-7 Compute the Level of Sales Required to Attain a Target Profit [LO5-6]
4.
value:
2.00 points
Required information
Exercise 5-7 Part 1
Using the equation method, determine for the unit sales that are required to earn a target profit of $6,700.
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Hint #1
5.
value:
2.00 points
Required information
Exercise 5-7 Part 2
Using the formula method, determine for the unit sales that are required to earn a target profit of $9,100.(Round your answer to the nearest whole number.)
Ch 5: E 5,6,7
instructions | helpExplanation / Answer
Particulars In $ Selling price 135 per unit Variable exp. 54 per unit Fixed exp. 40280 Contribution Margin = Selling Price - Variable cost Hence , Contribution margin = 135-54 = $81 per unit Suppose total sale be S Profit = Contribution margin - Fixed exp. Profit = (81 * S) - 40280 Answer - Exercise 5-7 Part 1 To attain target profit of $ 6700 , sales would be Profit = (81 * S) - 40280 6700 = (81 * S) - 40280 81 * S = 46980 S i.e Sales = 580 units Answer - Exercise 5-7 Part 2 To attain target profit of $ 9100 , sales would be Profit = (81 * S) - 40280 9100 = (81 * S) - 40280 81 * S = 49380 S i.e Sales = 610 units