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    Desired profit and net income

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    Please help with the following problem.

    Use the following to answer questions 42-43:
    The following is Addison Corporation's contribution format income statement for last month:

    Sales $1,000,000
    Less variable expenses 700,000
    Contribution margin 300,000
    Less fixed expenses 180,000
    Net income $ 120,000

    The company has no beginning or ending inventories. A total of 20,000 units were produced and sold last month.

    42. If sales increase by 100 units, by how much should net income increase?
    A) $ 400 C) $1,500
    B) $4,800 D) $2,500

    43. How many units would the company have to sell to attain target profits of $150,000?
    A) 22,000 C) 25,000
    B) 37,500 D) 26,667

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    Solution Preview

    42. Net income will increase by contribution of 100 units.
    Contribution per unit is 300000/20000= ...

    Solution Summary

    This explains the computation of units to earn desired profit and net income. Step by step calculations are given for each.