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Hi :) I have a question: 1. Green Grass Industries has total fixed costs of $150,000...

Hi :)

I have a question:

1. Green Grass Industries has total fixed costs of $150,000 and the company’s contribution margin is $75. Last year, Green Grass earned $50,000 pre- tax, and this year it would like to improve on that figure by 20% If the unit price is $125, how many units must Green Grass sell to meet this objective? How much net profit will Green Grass earn if it sells 2,200 units?

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Answer #1

Answer-Number of units must Green Grass sell to meet this objective is 2800 units.

Explanation- Desired pre tax profit = $50000+($50000*20%)

= $60000

Units sell to earn desired profit= (Fixed cost+ Desired profit)/Contribution margin per unit

= ($150000+$60000)/$75 per unit

= $210000/$75 per unit

= 2800 units

Net profit if Green Grass sells 2200 units = (Sold unit*Contribution margin per unit)-Fixed costs

= (2200 units*$75 per unit)-$150000

= $165000-$150000

= $15000

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