Question

Please answer this question and make active static budget according to this information with 450 words :

Sale price per unit : 20$
Variable cast per unit : 5.96 $
total fixed cost : 960919 $
If you sell 60000 units in year 1, 69000 (growth in sale by 15%) in 2nd year and 75900 units in year 3.
You are now curious to know how many jellybean bags you need to sell to earn an income of $100,000 Canadian Dollars. What do you think, is it feasible in first, second, or third year? Briefly explain your findings.

Answer 1

To earn a net income of $100,000 Canadian Dollars, approximately 75,605 units need to be sold. This target is not feasible in the first or second year's projected sales, but it is feasible in the third year with the projected sale of 75,900 units.

Step-by-step explanation:

The question asks for the calculation of how many units need to be sold to earn an income of $100,000 Canadian Dollars, considering the sale price, variable cost per unit, and total fixed cost provided. To determine feasibility, we analyze the break-even point and then calculate the required sales for the desired income in the first three years.

To start, the contribution margin per unit is calculated as the sale price minus the variable cost per unit: $20 - $5.96 = $14.04. The break-even point in units is the total fixed costs divided by the contribution margin per unit, $960,919 / $14.04 which equals approximately 68,461 units.

Next, we calculate the number of units needed to be sold to earn $100,000 net income, which involves covering the fixed costs and the desired net income: ($960,919 + $100,000) / $14.04, resulting in approximately 75,605 units.

Based on the sales projections, we can evaluate if the target net income is feasible:

• Year 1: 60,000 units (not feasible)
• Year 2: 69,000 units (not feasible)
• Year 3: 75,900 units (feasible)

Thus, earning an income of $100,000 is not feasible in the first or second year, but it is feasible in the third year when 75,900 units are expected to be sold.