Exercise 6-7 Target Profit Analysis [LO6-6) Lin Corporation has a single product

Question

Exercise 6-7 Target Profit Analysis [LO6-6) Lin Corporation has a single product whose selling price is $140 per unit and whose variable expense is $70 per unit. The company's monthly fixed expense is $32,600. Required 1. Calculate the unit sales needed to attain a target profit of $6,250. (Do not round intermediate calculations.) 2. Calculate the dollar sales needed to attain a target profit of $8,000. (Round your intermediate calculations to the nearest whole number.) 1. Units sales to attain target profit 2. Dollar sales to attain target profit units

Explanation / Answer

1) Contribution margin per unit = 140-70 = 70 per unt

Units sales to attain target profit = (Fixed cost+Target profit)/Contribution margin per unit

= (32600+6250)/70

Units sales to attain target profit = 555 Units

2) Contribution margin ratio = (140-70)*100/140 = 50%

Dollar sales to attain target profit = (Fixed cost+target profit)/Contribution margin ratio

= (32600+8000)/0.50

Dollar sales to attain target profit = $81200

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