Desired profit is $5,400 Munoz Company makes and sells products with variable co

Question

Desired profit is $5,400

Munoz Company makes and sells products with variable costs of $51 each. Munoz incurs annual fixed costs of $32,400. The current sales price is $69. d. If the sales price drops to $65 per unit, what level of sales is required to earn the desired profit? Express your answer in units and dollars. Prepare an income statement using the contribution margin format. Complete this question by entering your answers in the tabs below. Required D1 Required D2 If the sales price drops to $65 per unit, what level of sales is required to earn the desired profit? Express your answer in units and dollars. Sales volume in units Sales volume in dollars

Explanation / Answer

d.

Contribution margin per unit = Sales price per unit - Variable costs per unit

= 65 - 51

= 14

Level of sales required to earn desired profit (in units)= (Fixed costs + Desired profit) / Contribution margin per unit

= (32,400 + 5,400) / 14

= 2,700

Sales volume in dollars = Sales volume in units * 65 per unit

= 2,700 * 65

= 175,500

MUNOZ COMPANY

Income Statement

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e.

Contribution margin per unit = Sales price per unit - Variable costs per unit

= 69 - 51

= 18

Level of sales required to earn desired profit (in units)= (Fixed costs + Desired profit) / Contribution margin per unit

= (22,600 + 5,400) / 18

= 1,556

Sales volume in dollars = Sales volume in units * 69 per unit

= 1,556 * 69

= 107,364

MUNOZ COMPANY

Income Statement

* 5,408 rounded off to 5,400

Sales volume in units 2,700 Sales volume in dollars 175,500

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