I know the answers but am not sure how to get to them. If someone can please sho

Question

I know the answers but am not sure how to get to them. If someone can please show work on how to get to these answers it would be greatly appreciated

1) During March, Adams company had sales of 5,000,000, variable expenses of 3,000,000, and fixed expenses of 1,500,000. Assume that cost behavior and unit selling price remain uncahnged during April. In order for the company to realize net operating income of 300,000 for April, sales would have to be:

Answer: 4,500,000

2) Assume that a firm can sell 10,000 units of a product and that the variable expenses are $2 per unit. Fixed expenses are $20,000, and the firm wishes to earn a net income of $10,000. What price must the firm be able to charge?

Answer: $5 per unit

Explanation / Answer

1) Sales = 5000000, Variable expenses = 3000000, Fixed expenses = 1500000

Contribution margin = Sales - Variable expenses = 2000000

Operating income = Contribution margin - Fixed expenses = 500000

All above information are given in the question, now if operating income has to be 300000, then contribution margin has to be = 1500000+300000 = 1800000 (Fixed expenses will remain same)

As given in question cost behaviour and unit selling price remains unchanged, then new Sales amount will be

= 1800000 / 2000000 * 5000000 = 4500000

2) For this question we will use formulaes as below

we know Operating income = Contribution margin - Fixed expenses

so, $10000 = Contribution margin - $20000 ; Contribution margin = $30000......(i)

also, Contribution margin = Sales - Variable expenses; assume Sales price per unit = X,

then, Contribution margin = 10000X - 20000......(ii)

equating equation (i) and (ii)

10000X - 20000 = 30000; X = $5

So, Sales price per unit - $5

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