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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773

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BuyFindarrow_forward

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773
Textbook Problem
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Solemon Company has total fixed cost of $15,000, variable cost per unit of $6, and a price of $8. If Solemon wants to earn a targeted profit of $3,600, how many units must be sold?

  1. a. 2,500
  2. b. 7,500
  3. c. 9,300
  4. d. 18,600
  5. e. 18,750

To determine

Calculate the number of units to be sold in order to earn a target profit of $3,600.

Explanation

Target Profit:

Target profit can be defined as the expected amount of profit or income that the companies desire to earn at the end of the accounting period.

c.

Use the following formula to calculate the number of units:

Units to be sold=(Fixed cost+Target profit)Contribution margin per unit1

Substitute $15,000 for the fixed cost, $3,600 for target profit and $2 for contribution margin per unit in the following formula.

Units to be sold=($15,000+$3,600)$2=$18,600$2=9,300 units

Therefore, the number of units to be sold to earn a profit of $3,600 is 9,300 units

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