Answer:
Naylor Company
1. The number of units sold in 2016 is:
= 12,152.
2. The number of units that would have to be sold in 2017 to reach the stockholders' desired profit level is:
= 13,238.
3. Assuming that Naylor Company sells the same number of units in 2017 as it did in 2016, the selling price have to increase to $155.37 in order to reach the stockholders' desired profit level.
Step-by-step explanation:
a) Data and Calculations:
Net income in 2016 = $153,300
Selling price per unit = $150
Variable costs per unit = $90
Contribution margin per unit = $60
Fixed costs = $575,800
Contribution margin = Fixed costs + Net income
= $575,800 + $153,300
= $729,100
Units sold = $729,100/$60 = 12,152
b) To increase net income by $65,200 in 2017, contribution margin will also increase by the same amount. Therefore, the total contribution margin = $794,300 ($729,100 + $65,200).
Units sold = $794,300/$60 = 13,238
c) The selling price will have to increase by $5.37 ($65,200/12,152) to $155.37.