Question

Lin Corporation has a single product whose selling price is $135 per unit and whose variable expense is $54 per unit. The company’s monthly fixed expense is $40,400.

Required:


1. Calculate the unit sales needed to attain a target profit of $4,150.


2. Calculate the dollar sales needed to attain a target profit of $8,800. (Round your answer to the nearest whole number.)

Answer 1

When target profit is $4150 sales unit is 550

When target profit is $8800 sales unit is 607

Step-by-step explanation

Unit sales to attain a target profit =fixed expenses +target profit/contribution per unit

Fixed expenses is $40,400

target profit of $4150

contribution per unit =selling price - variable cost

selling price is $135

variable cost is $54

contribution per unit=$135-$54

=$81

Unit sales at target profit of $4150=($40,400+$4150)/$81

=550 units

Unit sales at target profit of $8,800=($40,400+$8,800)/$81

=607 units