Question

chois sales director believes the company can sell 2800 units at a selling price of 380 or 5300 units at a price of 330 or 6800 units at a price of 230. if it chose to sell 6800 units, however, it would incur additional advertising costs of $66000 and variable selling costs of $6 per unit.

Data

1-3000 units produced fixed costs 275000 variable cost per unit 74

3001-6000 units produced fixed costs 405000 variable cost per unit 44

6001-10000 units produced fixed costs 815000 variable cost per unit 24

(a) if Choi sells 2800 units, its operating income will be?

(b) if Choi sells 5300 units its operating income will be?

(C) if choi sells 6800 units its operating income will be?

Choi should plan to produce and sell ________ units because this level of production and sales _______________

Answer 1

Particulars	(a)	(b)	(c)
Selling Price per unit	380	330	230
Less: Variable Cost per unit	74	44	24
Less: Variable Selling Cost per unit	-	-	6
Contribution	306	286	200
units	2,800	5,300	6,800
Total Contribution	856,800	1,515,800	1,360,000
Less: Fixed Cost	275,000	405,000	815,000
Less: Additional advertising Cost	-	-	66,000
Operating Income	581,800	1,110,800	479,000

Choi should plan to produce and sell 5,300 units because this level of production and sales gives the highest operating income