Question

Lin Corporation has a single product whose selling price is $130 per unit and whose variable expense is $65 per unit. The company's monthly fixed expense is $32,150. Required: 1. Calculate the unit sales needed to attain a target profit of $2,300. (Do not round intermediate calculations.) 2. Calculate the dollar sales needed to attain a target profit of $8,900. (Round your intermediate calculations to the nearest whole number.) 1. Units sales to attain target profit 2. Dollar sales to attain target profit

Answer 1

1. Sale price = $130

Variable Expense = $65

Contribution Margin per unit = $130 - $65 = $65

Units to Profit = (Fixed Cost + Target Profit)/Contribution Margin = ($32,150 + $2,300)/65 = 530 units

2. Contribution Margin Ratio = Contribution Margin/Sales Revenue = $65/$130 = 0.5

Sales to Profit = (Fixed Cost + Target Profit)/Contribution Margin Ratio = ($32,150 + $8,900)/0.5 = $82,100

Answer:

1. Selling 530 units will achieve $2,300 operating profit.

2. Sales for $82,100 will achieve $8,900 operating profit.