Question

The Ring Division of A1d-Y6z Company reported the following information for May: selling price per unit .................... $35 variable costs per unit ................... $12 turnover .................................. 2.50 residual income ........................... $229,600 margin .................................... 22% units sold ................................ 40,000 Calculate the number of units the Ring Division needed to sell in May in order for the residual income in May to be $505,600.

Answer 1

52,000 units

Step-by-step explanation:

Selling price = $35*40,000 = $1,400,000

Variable cost = $12 * 40,000 = $480,000

Contribution margin = $1,400,000 - $480,000 = $920,000

Fixed cost = Residual income + Contribution

Fixed cost = $920,000 - $229,600

Fixed cost = $690,400

Sales to earn residual income = [Fixed cost + Desired profit] / Contribution per unit

Sales to earn residual income = [$690,400 + $505,600] / $35 - $12

Sales to earn residual income = $1,196,000 / $23

Sales to earn residual income = 52,000 units