Question

Hurst Co. manufactures and sells a single product. Price and cost data regarding this product are as follows: $40 per unit $20 per unit $6 per unit $208,000 per year per year $324,000 How many units need to be sold to earn an annual net income equal to 10% of sales? Variable manufacturing costs Variable selling & admin. expenses Fixed manufacturing overhead Fixed selling & admin. expenses a. 54,500 units. b. 44,000 units. c. 53,200 units. d. 47,500 units. Selling price

Answer 1

By setting up an equation and calculating the total revenue, total variable costs, and total fixed costs, we determine that Hurst Co. needs to sell 47,500 units to earn an annual net income equal to 10% of sales.

Step-by-step explanation:

The question involves the break-even analysis and profit planning in a business context. To determine how many units need to be sold to earn an annual net income equal to 10% of sales for Hurst Co., we can set up an equation using the given data:

• Selling Price per Unit: $40
• Variable Manufacturing Costs per Unit: $20
• Variable Selling & Admin Expenses per Unit: $6
• Fixed Manufacturing Overhead per Year: $208,000
• Fixed Selling & Admin Expenses per Year: $324,000

We're looking for the quantity (Q) where:

Annual net income = Total Revenue - Total Variable Costs - Total Fixed Costs

And where the Annual Net Income is equal to 10% of Total Revenue (0.10 * Total Revenue).

So the equation is:

(40 * Q) * 10% = (40 * Q) - ((20 * Q) + (6 * Q)) - (208,000 + 324,000)

After solving the equation, we find that Hurst Co. needs to sell 47,500 units to achieve the desired net income.