Question

Sunlight Design Corporation sells glass vases at a wholesale price of

$ 3.00$3.00

per unit. The variable cost to manufacture is

$ 2.00$2.00

per unit. The monthly fixed costs are

$ 8 comma 000.00$8,000.00.

Its current sales are

28 comma 00028,000

units per month. If the company wants to increase its operating income by

2020​%,

how many additional units must it​ sell? (Round any intermediate calculations to two decimal places and your final answer up to the nearest whole​ number.)

A.

84 comma 00084,000

glass vases

B.

32 comma 00032,000

glass vases

C.

8 comma 0008,000

glass vases

D.

4 comma 0004,000

glass vases

Answer 1

Ans.	Option D 4,000 glass vases
	WORKING NOTES :
	Step 1 : Calculations for current net operating income :
	Sunlight Design Corporation
	Contribution Income Statement
		Total	Per unit
	Sales (28,000 *p)	$84,000	$3.00
	Variable expenses (28,000 * v)	-$56,000	-$2.00
	Contribution margin	$28,000	$1.00
	Fixed expenses	-$8,000
	Current net operating income	$20,000
	P   =   price per unit
	V = variable cost per unit
	Step 2 : Calculations for income after increase in 20% :
	Increased net operating income = Current net operating income * 1.20
	$20,000 * 1.20
	$24,000
	Step 3 : Calculations for unit sales for increased net income :
	Unit sales for target profit   =   (Fixed expense + Target profit) / Contribution margin per unit
	($8,000 + $24,000) / $1
	$32,000 / $1
	32,000 units
	Step 4 : Calculations for additional units to be sold :
	Additional units = Unit sales for increased net income - Current units sold
	32,000 - 28,000
	4,000 glass vases