Question
In: Accounting
Vernon Corporation is a manufacturing company that makes small electric motors it sells for $52 per...
Vernon Corporation is a manufacturing company that makes small electric motors it sells for $52 per unit. The variable costs of production are $28 per motor, and annual fixed costs of production are $576,000. Required How many units of product must Vernon make and sell to break even? How many units of product must Vernon make and sell to earn a $72,000 profit? The marketing manager believes that sales would increase dramatically if the price were reduced to $46 per unit. How many units of product must Vernon make and sell to earn a $72,000 profit, if the sales price is set at $46 per unit?
Solutions
Expert Solution
1)Units to breakeven = Fixed cost /(price- variable cost)
= 576000/(52-28)
= 576000/ 24
= 24000 units
2)Target unit sales =[fixed cost+ target profit ]/[price-variable cost]
=[576000+72000]/[52-28]
= 648000/24
= 27000 units
3)Target unit sales = [576000+72000]/[46-28]
= 648000/18
= 36000 units
ekkarill92 answered 9 months agoRelated Solutions
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