Question
In: Accounting
Blue Spruce Company had $152,600 of net income in 2016 when the selling price per unit...
Blue Spruce Company had $152,600 of net income in 2016 when the selling price per unit was $153, the variable costs per unit were $93, and the fixed costs were $573,300. Management expects per unit data and total fixed costs to remain the same in 2017. The president of Blue Spruce Company is under pressure from stockholders to increase net income by $61,700 in 2017. Assume that Blue Spruce Company sells the same number of units in 2017 as it did in 2016. What would the selling price have to be in order to reach the stockholders’ desired profit level? (Round answer to 2 decimal places, e.g. 12.25.)
Solutions
Expert Solution
| Answer: |
|
Total contribution margin
= Desired Net Income + Fixed Costs = $152,600 + $573,300 = $725,900 |
|
Contribution margin per
unit = Sales per unit (-) Variable Cost per unit = $153 (-) $93 = $60 per unit |
|
Units Sales at Break Even in 2016 =
Total contribution margin / Contribution margin per unit = $725,900 / $60 = 12,098 Units |
|
Units Sold in 2017 = (Total
contribution margin + Increase in net Income) / Contribution margin
per unit = ( $725,900 + $61,700 ) / $60 = 13,127 Units |
|
Break even
= (Fixed cost + Desired
profit) / Contribution margin 12,098 = ( $152,600 + $573,300 + $61,700 ) / (Selling Price (X) (-) $93) (Selling Price (X) (-) $93) = $787,600 / 12,098 Selling Price per unit = $65.10 + $93 = $158.10 per unit |
| Selling Price per unit = Selling Price per unit |
ekkarill92 answered 1 year agoRelated Solutions
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hown below are comparative balance sheets for Blue Spruce Company. Blue Spruce Company Comparative Balance Sheets...
hown below are comparative balance sheets for Blue Spruce
Company.
Blue Spruce Company
Comparative Balance Sheets
December 31
Assets
2022
2021
Cash
$ 88,400
$ 28,600
Accounts receivable
114,400
98,800
Inventory
217,100
245,700
Land
104,000
130,000
Equipment
338,000
260,000
Accumulated depreciation—equipment
(85,800
)
(41,600
)
Total
$776,100
$721,500
Liabilities and Stockholders’ Equity
Accounts payable
$ 50,700
$ 55,900
Bonds payable
195,000
260,000
Common stock ($1 par)
280,800
226,200
Retained earnings
249,600
179,400
Total
$776,100
$721,500
Additional information:
1.
Net income...
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