Jasmine Inc. makes a single product that it sells for $25 each. Variable costs are $13...

Jasmine Inc. makes a single product that it sells for $25 each. Variable costs are $13 per unit and annual fixed costs total $30,000 per year. The company would like to realize operating income next year of $60,000. What level of sales in dollars must the company achieve to reach its target profit?

Solutions

Expert Solution

Solution:

The formula for calculating the level of sales in dollars the company must achieve to reach its target profit is :

= ( Annual Fixed costs + Operating Income ) / Contribution margin ratio

Where

Contribution margin ratio = ( Selling price per unit – Variable cost per unit ) / Selling price per unit

Calculation of Contribution margin ratio :

The formula for calculating the contribution margin ratio is

= ( Selling price per unit – Variable cost per unit ) / Selling price per unit

As per the information given in the question we have

Selling price per unit = $ 25 ; Variable cost per unit = $ 13

Applying the above information in the formula for contribution margin ratio we have

= ( $ 25 - $ 13 ) / $ 25

= $ 12 / $ 25

= 0.48

= 48 %

Thus the contribution margin ratio = 0.48 = 48 %

Calculation of the level of sales in dollars the company must achieve to reach its target profit:

As per the information available in the question we have

Annual Fixed costs = $ 30,000 ; Operating Income = $ 60,000 ; Contribution margin ratio = 0.48

The formula for calculating the level of sales in dollars the company must achieve to reach its target profit is

= ( Annual Fixed costs + Operating Income ) / Contribution margin ratio

Applying the above information in the formula we have

= ( $ 30,000 + $ 60,000 ) / 0.48

= $ 90,000 / 0.48

= $ 187,500

Thus the level of sales in dollars the company must achieve to reach its target profit = $ 187,500

ekkarill92 answered 10 months ago

Next > < Previous

Related Solutions

Genco Inc. makes a single product that sells for P50. The standard variable manufacturing cost is...

Genco Inc. makes a single product that sells for P50. The standard variable manufacturing cost is P32.50 and the standard fixed manufacturing cost is P7.50, based on producing 20,000 units. During the year Genco produced 22,000 units and sold 21,000 units. Actual fixed manufacturing costs were P157,000; actual variable manufacturing costs were P735,000. Selling and administrative expenses, all fixed, were P75,000. There were no beginning inventories. a. What is the net income under the standard absorption costing income statement?...

Pork Soda Inc. produces a single product and sells it for $98.00 a unit. Variable costs...

Pork Soda Inc. produces a single product and sells it for $98.00 a unit. Variable costs are $62.00 per unit and fixed costs are $12,000,000 a. calculate the break even point (number of units) b. calculate the EBIT for sales of 166,667units c. calculate the EBIT for sales of 500,000 units. d. create a break even chart for Pork Soda Inc. Please show work and explain each step please.

4.Genco Inc. makes a single product that sells for $50. The standard variable manufacturing cost is...

4.Genco Inc. makes a single product that sells for $50. The standard variable manufacturing cost is $32.50 and the standard fixed manufacturing cost is $7.50, based on producing 20,000 units. During the year Genco produced 22,000 units and sold 21,000 units. Actual fixed manufacturing costs were $157,000; actual variable manufacturing costs were $735,000. Selling and administrative expenses, all fixed, were $75,000. There were no beginning inventories. a.Prepare a standard absorption costing income statement. b.Prepare a standard variable costing income statement....

A company makes and sells a single product, the variable cost of the production is $3...

A company makes and sells a single product, the variable cost of the production is $3 per unit and variable cost of selling is $1 per unit, fixed cost totalled $600, and the selling price per unit was $6. The company budgeted to make and sell 3 000 units in the next year. Required Prepare a break even chart showing the expected amount of the output and sales required to break even.

Narchie sells a single product for $90. Variable costs are 60% of the selling price, and...

Narchie sells a single product for $90. Variable costs are 60% of the selling price, and the company has fixed costs that amount to $630,000. Current sales total 15,000 units. 1.) Narchie: a.) will break-even by selling 17,500 units. b.) will break-even by selling 5,500 units. c.) cannot break-even because it loses money on every unit sold. d.) will break-even by selling 10,833 units. e.) will break-even by selling 997,500 units. 2.) In order to produce a target profit of...

Wang Co. manufactures and sells a single product that sells for $600 per unit; variable costs...

Wang Co. manufactures and sells a single product that sells for $600 per unit; variable costs are $324 per unit. Annual fixed costs are $984,400. Current sales volume is $4,340,000. Compute the break-even point in dollars. Multiple Choice $1,826,001. $2,061,248. $4,343,038. $3,045,648. $2,140,000. Kent Co. manufactures a product that sells for $63.00. Fixed costs are $396,000 and variable costs are $30.00 per unit. Kent can buy a new production machine that will increase fixed costs by $19,800 per year, but...

Flannigan Company manufactures and sells a single product that sells for $500 per unit; variable costs...

Flannigan Company manufactures and sells a single product that sells for $500 per unit; variable costs are $270. Annual fixed costs are $943,000. Current sales volume is $4,250,000. Compute the contribution margin per unit.

A firm makes two products and Each und of costs $10 and sells for $40. Each unit of Z costs $5 and sells for $25

A firm makes two products and Each und of costs $10 and sells for $40. Each unit of Z costs $5 and sells for $25. If the firm's goal were to maximira profit, what would be the appropriate objective function?

Elmwood, Inc. currently sells 12,800 units of its product per year for $108 each. Variable costs...

Elmwood, Inc. currently sells 12,800 units of its product per year for $108 each. Variable costs total $83 per unit. Elmwood’s manager believes that if a new machine is leased for $208,000 per year, modifications can be made to the product that will increase its retail value. These modifications will increase variable costs by $16.00 per unit, but Elmwood is hoping to sell the modified units for $138 each. a-1. Should Elmwood modify the units or sell them as is?...

Elmwood, Inc. currently sells 13,000 units of its product per year for $110 each. Variable costs...

Elmwood, Inc. currently sells 13,000 units of its product per year for $110 each. Variable costs total $85 per unit. Elmwood’s manager believes that if a new machine is leased for $224,250 per year, modifications can be made to the product that will increase its retail value. These modifications will increase variable costs by $15.00 per unit, but Elmwood is hoping to sell the modified units for $140 each. a-1. Should Elmwood modify the units or sell them as is?...

Subjects