Asked by matthew winter on May 26, 2024
Verified
Journey Company is considering the production and sale of a new product with the following sales and cost data: unit sales price $18; unit variable costs $8.50; and total fixed costs of $81,250.Determine the dollar sales needed to generate a pre-tax income of $44,000,rounded to the nearest whole dollar.
Unit Sales Price
The amount charged to customers for a single unit of a product or service.
Fixed Costs
Costs that do not vary with the level of production or sales, including rent, salaries, and insurance premiums.
Variable Costs
Expenses that change in proportion to the amount of production or business operations.
- Compute the quantity of unit sales essential for achieving the predetermined pre-tax income.
Verified Answer
TF
Tristan FernandezMay 26, 2024
Final Answer :
Contribution margin ratio = ($18 - $8.50)/$18 = 52.8%
Targeted dollar sales = ($81,250 + $44,000)/0.528 = $237,216
Or,alternatively:‾\underline{\text{Or,alternatively:}}Or,alternatively:
Contribution margin per unit = $18 - $8.50=$9.50
Targeted sales in units= ($81,250 + $44,000)/$9.50=13,184 units rounded to nearest whole unit.
Targeted dollar sales = 13,184 units ∗ $18 =$237,312
Targeted dollar sales = ($81,250 + $44,000)/0.528 = $237,216
Or,alternatively:‾\underline{\text{Or,alternatively:}}Or,alternatively:
Contribution margin per unit = $18 - $8.50=$9.50
Targeted sales in units= ($81,250 + $44,000)/$9.50=13,184 units rounded to nearest whole unit.
Targeted dollar sales = 13,184 units ∗ $18 =$237,312
Learning Objectives
- Compute the quantity of unit sales essential for achieving the predetermined pre-tax income.