Help Exercise 3-7A Cost-volume-profit relationship LO 3-2 Ils for $44 per unit.
ID: 2514271 • Letter: H
Question
Help Exercise 3-7A Cost-volume-profit relationship LO 3-2 Ils for $44 per unit. The variable costs of Campbell Corporation is a m production are $24 per motor, and annual fixed costs of production are $360,000. Required a. How many units of product must Campbell make and sell to break even? b. How many units of product must Campbell make and sell to earn a $80,000 profit? c. The marketing manager believes that sales would increase dramatically if the price were reduced to $34 per unit. How many units of product must Campbell make and sell to earn a $80,000 profit, if the sales price is set at $34 per unit? es Prev 1 of 10 NextExplanation / Answer
Answer a
Note : Contribution per unit = Selling price per unit - variable costs per unit = $44 - $24 = $20
Break even in units = Annual Fixed costs / Contribution per unit = $360,000 / $20 = 18,000 units
Answer b
Target profit = $80,000
Target total contribution = Target profit + Annual Fixed costs = $80,000 + $360,000 = $440,000
Units to produce & sell to achieve target profit = Target total contribution / Contribution per unit
= $440,000 / $20 = 22,000 units
Answer c
Note : Cobtribution per unit (new) = $34 - $24 = $10
Target profit = $80,000
Target total contribution = Target profit + Annual Fixed costs = $80,000 + $360,000 = $440,000
Units to produce & sell to achieve target profit = Target total contribution / Contribution per unit (new)
= $440,000 / $10 = 44,000 units
Summary
a Sales vloume 18,000 units b Sales vloume 22,000 units c Sales vloume 44,000 unitsRelated Questions
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