Due to erratic sales of its sole product- a disposable pocket camera – Markline

Question

Due to erratic sales of its sole product- a disposable pocket camera – Markline Compnay has been experiencing difficulty for some time. The company’s contribution format income statement for the most recent month is given below.

Sales (30,000 units X $20.00 per unit)……………….. $600.000
Variable expenses (12.00)……………………………. (360,000)
Contribution margin…………………………………… 240,000
Fixed expenses………………………………………… 250,000
Net operating loss……………………………………… $(10,000)

Refer to the original data (the information in the above paragraph and the five numbers above). The marketing department thinks that a redesigned package for the camera would help sales. The new package would increase packaging costs by $0.75 per unit. Assuming no other charges, how many units would have to be sold each month to earn a profit of $9,200?

(Can someone please help me with this and explain if you can in a step by step manner what the answer is and how I go about getting the answer, each step and everything, thank you very much.)

Explanation / Answer

New Var cost = $12 + $0.75 = $12.75 So COnt pu = Sale price pu - Var cost pu = 20-12.75 = 7.25 pu No of units sold = (Fixed cost + Desired Profit)/Cont pu ie No of units sold = (250,000+9200)/7.25 = 35,751.72 ie No of units reqd to be sold is approx 35,752 for a profit of $9200

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