Purchase Solution

Number of Units the Company Must Sell to Make A Target Profit

Not what you're looking for?

Ask Custom Question

A company located in Munich makes Christmas nutcrackers and has an annual plant capacity of 2,400 product units. Its predicted operating results (in German marks) for the year are the following:

Production and sales of 1,500 units, total sales DM 180,000

Manufacturing costs:
-Fixed (total) 90,000
-Variable (per unit) 31

Selling and administrative expenses:
-Fixed (total) 50,000
-Variable (per unit) 15

Compute the following, ignoring income taxes:

1. There is a special order of 400 units to be sold at DM 50 per unit. Compute the new net income. You can state your assumptions about what costs are relevant and irrelevant. There is no one correct set of assumptions.

2. Ignore the requirement regarding the special order in part 1. Now the company wants a target net income of 30,000 DM. It wants to understand how and if it can achieve it.
For each method, compute the following:
-Compute the number of units the company must sell to make the targeted net income it desires. (Show calculations.)
-Explain what would happen in this situation if the variable costs increased or decreased.
-Explain what would happen in this situation if the fixed costs increased or decreased.
-What would happen in this situation if the sell price increased by 10% and all of the other costs stayed the same? (Show calculations.)

Discuss the limitations; do not limit the computations to what you think.

3. Assume that capacity and sales can be doubled to 4,800 units. Again, compute the new net income if facilities costing 500,000DM are added at 5-year life.

Purchase this Solution
Solution Summary

This solution provides step by step explanation for estimating the number of units company must sell to make targeted profit. Calculations are also included in the attached Excel file.

Solution Preview

Decision-Making
A company located in Munich makes Christmas nutcrackers and has an annual plant capacity of 2,400 product units. Its predicted operating results (in German marks) for the year are the following:

Production and sales of 1,500 units, total sales DM 180,000

Manufacturing costs:
-Fixed (total) 90,000
-Variable (per unit) 31

Selling and administrative expenses:
-Fixed (total) 50,000
-Variable (per ...

Purchase this Solution
Free BrainMass Quizzes
Motivation

This tests some key elements of major motivation theories.

SWOT

This quiz will test your understanding of the SWOT analysis, including terms, concepts, uses, advantages, and process.

Introduction to Finance

This quiz test introductory finance topics.

Lean your Process

This quiz will help you understand the basic concepts of Lean.

Balance Sheet

The Fundamental Classified Balance Sheet. What to know to make it easy.

View More Free Quizzes
Related BrainMass Solutions

  • Break Even and Target Income

    Assuming that Newman decides to sell its product for $23 per unit, determine the number of units it must sell to generate a $100,000 profit B&B Company First, you must figure the cost of goods sold (COGS) to determine the amount of profit each unit

  • Break Even

    The contribution margin per unit is: 2. The number of units that Company A must sell each year to break even is: 3. The number of units that Company A must sell annually to make a profit of $144,000 is: 1. CM = 20 - (4+1.60+.40+2) = 12 2.

  • Applying the Regression Model

    Also, the company wants a profit of $80,000. How many units would it have to sell at the lower selling price to achieve this target?

  • Profit, cycle time

    To achieve this target the firm must have a cycle time of A.more than 12.50 minutes B.more than 10.00 minutes C.7.5 minutes or less D.8 minutes or less It will be C. as it has to make 40 units in every five hours.

  • Cost Classification/Target Profit

    From this information make appropriate assumptions about cost behavior and assume that the direct labor costs vary directly with the number of units produced. How many units must the company sell in order to earn a pretax profit of $500,000.00?

  • A company whose fixed costs of $360,000 can elaborate: CVP

    2- What is the number of units to sell to recover its costs totals?

  • Breakeven, Target Profit and Safety Margin

    The sales price averages $9, and it costs the firm $3 to make and deliver each pizza. A. How many pizzas must Tony's sell to break even? B. How many pizzas must the company sell to earn a target profit of $54,000? C.

  • Determine East' breakeven volume for their sales of books.

    Determine the company's breakeven volume for this book i) in units ii) in dollar sales Develop a breakeven chart for the text Determine the number of copies EAST must sell in order to earn an operating profit of $21,000 on this text Determine

  • Acoounting Problems from Textbook

    Treat Industries plans to sell the product for $55.00. 1. Using the contribution margin approach, compute the number of products the company must sell to (a) break even and (b) earn a target profit of $70,224. 2.

View More Related Solutions