Question

Lin Corporation has a single product whose selling price is $140 per unit and whose variable expense is $70 per unit. The company's monthly fixed expense is $31,900. Required: 1. Calculate the unit sales needed to attain a target profit of $6,250. (Do not round intermediate calculations.) 2. Calculate the dollar sales needed to attain a target profit of $9,400.

Answer 1

To attain a target profit of $6,250, the company needs to sell 775 units. To achieve a target profit of $9,400, the company needs to generate $41,300 in dollar sales.

Step-by-step explanation:

To calculate the unit sales needed to attain a target profit of $6,250, we need to use the formula: (Unit sales x Selling price) - (Unit sales x Variable expense) - Fixed expenses = Target profit. Plugging in the given values, we get: (Unit sales x $140) - (Unit sales x $70) - $31,900 = $6,250. Solving for unit sales, we find that it is 775 units.

To calculate the dollar sales needed to attain a target profit of $9,400, we can use the same formula: (Unit sales x Selling price) - (Unit sales x Variable expense) - Fixed expenses = Target profit. Rearranging the formula, we get: Dollar sales = (Target profit + Fixed expenses) / (Selling price - Variable expense). Plugging in the given values, we have: Dollar sales = ($9,400 + $31,900) / ($140 - $70) = $41,300.