Question
In: Accounting
Gauani Corporation produces and sells a single product. Data concerning that product appear below: Selling price...
Gauani Corporation produces and sells a single product. Data concerning that product appear below:
Selling price per unit $150.00
Variable expense per unit $42.00
Fixed expense per month $421,200
Required:
a. Assume the company's monthly target profit is $21,600. Determine the unit sales to attain that target profit. Show your work!
b. Assume the company's monthly target profit is $54,000. Determine the dollar sales to attain that target profit. Show your work!
Please provide process details.
Solutions
Expert Solution
a. Target Profit = $ 21,600
Add: Fixed Cost = $ 421,200
Hence, Required Total Contribution Margin = $ 442,800
Contribution Margin Per Unit = Sales Price Per Unit- Variable Cost Per Unit
= $ 150 - $ 42
= $ 108
Hence, Units to be Sold to attain the required profit = Contribution Margin Total / Contribution Margin Per Unit
= $ 442,800 / $ 108
= 4,100 Units
Hence the correct answer is $ 4,100
b.
Target Profit = $ 54,000
Add: Fixed Cost = $ 421,200
Hence, Required Total Contribution Margin = $ 475,200
Contribution Margin Per Unit = Sales Price Per Unit- Variable Cost Per Unit
= $ 150 - $ 42
= $ 108
Units to be Sold to attain the required profit = Contribution Margin Total / Contribution Margin Per Unit
= $ 475,200/ $ 108
= 4,400 Units
Hence, dollar sales to attain that target profit = Units to be Sold to attain the required profit * Selling Price Per Unit
= 4,400 Units * $ 150
= $ 660,000
Hence the correct answer is $ 660,000
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