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Question 1 Big Chill, Inc. sold 154,795 portable dehumidifier units at $126. Unit variable costs were...

Question 1

Big Chill, Inc. sold 154,795 portable dehumidifier units at $126. Unit variable costs were $71. Fixed costs were $3,280,000. At this price and volume, what was the firm's return on sales? Report your answer as a percentage and round to the nearest whole number.

Question 2

Big Chill, Inc. sells portable dehumidifier units at $189. Unit variable costs are $114. Fixed costs are $4,175,000. Management has set a profit objective of 16.4% return on sales. Calculate the sales volume in dollars that will provide a 16.4% return on sales. Round your answer to the nearest dollar.

Expert Solution

Question 1

- Sales = No of units sold*sales per unit = 154,795*$126

= $19,504,170

Variable Cost = No of units sold*Variable Cost per unit = 154,795*$71

= $10,990,445

Profit = Sales - Varaiable cost - Fixed Cost

Profit = $19,504,170 - $10,990,445 - $3280,000

Profit = $5233,725

- Return on Sales = Profit/Sales = $5233,725/19,504,170

Return on Sales = 26.83%

Question 2

- Contribution per Unit = Sales per unit - Variable Cost per unit = $189 - $114

= $75

Return on Sales to be achieved = 16.4%

Let the No of Units Sold be X

Return on Sales = [(Contribution per Unit*No of Units Sold) - Fixed Cost]/(Sales per unit*No of Units Sold)

0.164 = [($75*X) - $4175,000]/($189*X)

30.996*X = 75*X - $4175,000

$4175,000 = 75*X - 30.996X

$4175,000 = 44.004*X

X = 94,877.74

No of units = 94,878 units

Sales Volume to achieve = 94,878 units*$189

Sales Volume to achieve = $17,931,942

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jeff jeffy answered 2 years ago

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