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    MBA - Accounting Problem

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    Attached please find a problem that I need help with. Based on the attached problem, please answer the following question:

    1) Unfortunately, by October of the next year it had become clear that the company would not be able to make the $2,000,000.00 target profit. In fact, it looked like the company would wind up the year as originally planned, with sales of 400,000 units, no ending inventories, and a profit of $1,672,000.00. Several managers who were reluctant to lose their year-end bonuses suggested to Guochang that the company could still show a profit of more than the $2,000,000.00. If sales are 400,000 units and the selling price and cost structure remain the same, how many units would have to be produced in order to show a profit of $2,500,000.00 under absorption costing? Please explain and comment.

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    Solution Preview

    Please see the attached file.

    Variable Cost per Unit
    Direct Material $57.20
    Direct Labour $15.00
    Variable Manufacturing Overhead $5.00
    Variable Selling and Admin $10.00
    Total Variable Cost per Unit $87.20

    Fixed ...

    Solution Summary

    This solution helps with an accounting problem.