Instructions Cost Beha Mulitple P Relevant C Pricing Fixed vs V 4 Lincoln compan
ID: 340572 • Letter: I
Question
Instructions Cost Beha Mulitple P Relevant C Pricing Fixed vs V 4 Lincoln company sells tote bags in the smal, medium and large caregories 5 Below are the unit selling price for each category as well as its respective Unit Price Unit Variable Cos UCM %Sales Mix unit variable costs: Small Medium Smal Medium Lage Large 100 100 45 Unt Price WA UCM 10 Unit Variable Cost 2 The sales mix% is as follows 14 Sales Mix % 16 The company's annual fixed costs are $72,000 with a targeteratng profit of $108,000. 18 How much of each item needs to be sold in order to break-even?. in order to reach the 19 target operating profr? 21 Concept Question Fxed Cost $72,000 Medium Large 20% Small 40% 40% Break Even Fixed Cost Unit Contribution Margirn Break Even 2.000 %Sales Mix 40% small 20% Medium 40% Large 800 Suppose 4,900 units were actual ly sold. Would it be possible for this company to achieve its Target Operating Proft of s108,000 Target Amount of Units = (Fixed Cost + Target Operating profit)/UCM (assuming fxed costs were $72,000). If so, why and what would have had to happen? Target Operating Profit $108,000 27 Target amount of Units to reach Target Operating Profit 5000 %Sales Mix 40% Small 2000 2096 Medium 1000 40% Large 2000Explanation / Answer
Your answer is absolutely correct as reagrds figures are concerned. Now for requirement part you should say that
"It would not be possible for this company to achieve its target operating profit of $108000. This is so because, at given sales mix, the company need to sale 5000 units to reach the operating profit of $108000. Now, to achieve the target operating profit of $108000 with sale of 4900 units, we need to change the sales Mix".