Background: Dillon, Jones, and Kline, Ltd. is studying the acquisition of two el
ID: 2427726 • Letter: B
Question
Background:
Dillon, Jones, and Kline, Ltd. is studying the acquisition of two electrical component insertion systems for producing its sole product, the universal gismo. Data relevant to the systems follow.
Question:
The selling price is $70 per unit for the universal gismo, which is subject to a 5 percent sales commission. (In the following requirements, ignore income taxes.)
Assume Model B requires the purchase of additional equipment that is not reflected in the preceding figures. The equipment will cost $430,000 and will be depreciated over a five-year life by the straight-line method. How many units must the company sell to earn $970,000 of income if Model B is selected? As in requirement (2), sales and production are expected to average 49,000 units per year.
I've tried so many things but can't get the answer. I've looked at other Chegg answers, but those are all wrong. Please help.
Background:
Dillon, Jones, and Kline, Ltd. is studying the acquisition of two electrical component insertion systems for producing its sole product, the universal gismo. Data relevant to the systems follow.
Explanation / Answer
Dillon Jones & Kline Details Amt $ When Model B is selected Additional machine cost 430,000 Useful life in years 5 Yearly SL dereciation 86,000 Other Annual Fixed cost 1,113,900 Total Fixed cost 1,199,900 CVP analysis Units sales price 70 Variable unit costs 11.80 Sales commission /unit 3.50 Total Variable cost per unit 15.30 a Contribution /unit 54.70 Total Fixed cost 1,199,900 Required profit 970,000 b Total contribution required 2,169,900 Units to be sold =b/a= 39,669 So required units to be sold=39,669
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