3. Lagerfield Company reported the following results from the sale of 4,220 hamm

Question

3.

Lagerfield Company reported the following results from the sale of 4,220 hammers in May: sales $198,340, variable costs $88,620, fixed costs $64,000, and net income $24,000. Assume that Lagerfield increases the selling price of hammers by 10% on June 1. How many hammers will have to be sold in June to maintain the same level of net income? (Round answer to the nearest unit).

3.

Lagerfield Company reported the following results from the sale of 4,220 hammers in May: sales $198,340, variable costs $88,620, fixed costs $64,000, and net income $24,000. Assume that Lagerfield increases the selling price of hammers by 10% on June 1. How many hammers will have to be sold in June to maintain the same level of net income? (Round answer to the nearest unit).

Explanation / Answer

Initial Selling price = 198,340/4220 = $ 47

Selling price now = 1.1*47 = $ 51.7

Variable Costs per unit = 88,620/4220 = $21

Sales = 51.7*X.......................where X = no. of hammers

and

Varibale cost = 21*X

so

Net Income = Sales - Costs

24,000 = 51.7*X - 21*X - 64,000

88,000 = 30.7*X

X = 88,000/30.7

X = 2866.45

so ans is 2866 or 2867 hammmers

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