Exercise 18-14 Naylor Company had $151,400 of net income in 2016 when the sellin
ID: 2525820 • Letter: E
Question
Exercise 18-14 Naylor Company had $151,400 of net income in 2016 when the selling price per unit was $152, the variable costs per unit were $92, and the fixed costs were $574,800 Management expects per unit data and total fixed costs to remain the same in 2017. The president of Naylor Company is under pressure from stockholders to increase net income by $65,700 in 2017. Compute the number of units sold in 2016. (Round answer to O decimal places, e.g. 1,225.) units LINK TO TEXT LINK TO TEXT VIDEO: APPLIED SKILLS Compute the number of units that would have to be sold in 2017 to reach the stockholders' desired profit level. units LINK TO TEXT LINK TO TEXT VIDEO: APp Assume that Naylor Company sells the same number of units in 2017 as it did in 2016. What would the selling price have to be in order to reach the stockholders' desired pofitleel? (Round answer to 2 decimal places, e.g. 12.25.) New selling price sExplanation / Answer
1. number of units sold in 2016 = (net income + fixed costs) / (sale price per unit - variable cost per unit)
=> ($151,400 + 574,800) / (152-92)
=>12,103 units.
2. number of unit to be sold in 2017 = (existing net income + desired increase in net income + fixed cost) / (sale price per unit - variable cost per unit)
=> (151,400 + 574,800 + 65,700) / (152-92)
=>13,198.33
=>13,198 units.
3. new selling price :
number of units = 12,103 units.
increase in profit = $65,700
increase in sale price per unit = increase in profit / number of units sold
=>$65,700 / 12,103
=>$5.43
existing sale price = $152.
new sale price = $152 + 5.43 =>$157.43.
therefore the selling price should be = $157.43.
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