Ch o5 Ex 5 126 12 Computing sales to achieve target income LO C2 Blanchard Compa
ID: 340954 • Letter: C
Question
Ch o5 Ex 5 126 12 Computing sales to achieve target income LO C2 Blanchard Company manufactures a single product that sells for $208 per unit and whose total variable costs are $156 per unit. The company's annual fixed costs are $806,000. Management targets an annual pretax income of $1.300,000. Assume that fixed costs remain at $906 000 (1) Compute the unit sales to earn the target income. Units to achieve target (2) Compute the dolilar sales to earn the target income. Choose DenominatorDollars to Achieve Torget Dolars to achieve targetExplanation / Answer
CALCULATION OF CONTRIBUTION MARGIN PER UNIT PARTICULARS AMOUNT Sales $ 208 Less: Variable Cost $ 156 Contribution Margin $ 52 Contribution margin = Sales - Variable Costing / Sales Contribution margin = $ 52 / $ 208 = 25.00% CALCULATION OF THE BREAK EVEN POINT IN UNITS Break Even point = Fixed Cost / Contribution Margin Per Unit Break Even point = Fixed Cost = 806000 Divide By "/" By Contribution Margin Per Unit = $ 52 Break Even point = 15,500.00 Answer Break even point in units = 15,500 Units No. of Units to produced the desired profit = Desired profit in Dollars / contribution margin per unit + Break even number of units No. of Units to produced the desired profit = Desired profit in dollars = 1300000 Divide By = "/" By Contributyiton margin per unit = $ 52 "=" 25,000 Units Add: Break even number of units = 15,500 Units Total Units for required profit = 40,500 Units Answer = 40,500 Units Answer = 2 Dllar Sales to Earn Target Income = Target Unit produced X Sales Price per unit Dllar Sales to Earn Target Income = 40,500 Units X $ 208 = $ 84,24,000