Lynn Company had $139,110 of net income in 2010 when the selling price per unit
ID: 2435626 • Letter: L
Question
Lynn Company had $139,110 of net income in 2010 when the selling price per unit was $169, the variable costs per unit were $60, and the fixed costs were $1,115,480. Management expects per unit data and total fixed costs to remain the same in 2011. The president of Lynn Company is under pressure from stockholders to increase net income by $52,170 in 2011.Compute the number of units sold in 2010
# of units =
Compute the number of units that would have to be sold in 2011 to reach the stockholders' desired profit level. (Round answer to 0 decimal places, e.g. 125.)
# of units =
Assume that Lynn Company sells the same number of units in 2011 as it did in 2010. What would the selling price have to be in order to reach the stockholders' desired profit level? (Round answer to 0 decimal places, e.g. 125.)
$ =
Explanation / Answer
Compute the number of units sold in 2010
# of units = 11,510
# of units = (Net Income + Fixed Cost) / Contribution per unit
= ($139,110 + $1,115,480) / ($169 - $60)
= $1,254,590 / $109 = 11,510 units
Compute the number of units that would have to be sold in 2011 to reach the stockholders' desired profit level. (Round answer to 0 decimal places, e.g. 125.)
# of units = 11,989
# of units = (Net Income + Fixed Cost) / Contribution per unit
= ($139,110 + $52,170 + $1,115,480) / ($169 - $60)
= $1,306,760 / $109
= 11,988.62 OR 11,989 units
Assume that Lynn Company sells the same number of units in 2011 as it did in 2010. What would the selling price have to be in order to reach the stockholders' desired profit level? (Round answer to 0 decimal places, e.g. 125.)
Variable cost 11,510 x $60 $690,600
Fixed cost $1,115,480
Desired Income $139,110 + $52,170 $191,280
Total Sales $1,997,360
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Selling price per unit $1,997,360 / 11,510 = $173.53 or $174
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