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

ekkarill92 answered 1 year ago
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