Question

A Company makes and sells calculators. The variable cost of each calculator is $20. The calculators are sold for $30 each. Fixed operating expenses amount to $40,000. Determine the sales volume in units and dollars that is required to attain a profit of $12,000. Verify your answer by preparing an income statement using the Contribution margin format.

a) 1,500 units and $45,000
b) 4,000 units and $120,000
c) 1,200 units and $36,000
d) 5,000 units and $150,000

Answer 1

To attain a $12,000 profit, the company needs to sell 5,200 units, resulting in sales of $156,000. This calculation is not consistent with the provided answer choices (a, b, c, d).

Let's calculate the sales volume in units and dollars required to attain a profit of $12,000. \[ \text{Profit} = (\text{Selling Price} - \text{Variable Cost}) \times \text{Sales Volume} - \text{Fixed Expenses} \]

Given:

- Variable Cost per calculator = $20

- Selling Price per calculator = $30

- Fixed Operating Expenses = $40,000

- Desired Profit = $12,000

\[ \text{Profit} = (30 - 20) \times \text{Sales Volume} - 40,000 \]

Solving for Sales Volume:

\[ 12,000 = 10 \times \text{Sales Volume} - 40,000 \]

\[ \text{Sales Volume} = \frac{12,000 + 40,000}{10} \]

\[ \text{Sales Volume} = \frac{52,000}{10} \]

\[ \text{Sales Volume} = 5,200 \text{ units} \]

Now, let's calculate the sales in dollars:

\[ \text{Sales in Dollars} = \text{Selling Price} \times \text{Sales Volume} \]

\[ \text{Sales in Dollars} = 30 \times 5,200 \]

\[ \text{Sales in Dollars} = $156,000 \]

So, the correct answer is: \[ \text{Sales Volume} = 5,200 \text{ units and Sales in Dollars} = $156,000 \]

Therefore, none of the provided options (a, b, c, d) match the correct answer based on the calculations.