How many units need to additionally produced for inventory

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Problem - On December 25, a company realizes that it will not meet its target for the year. The earnings target based on absorption-costing is $1,000,000 and the data so far is as follows:

Sales Revenue

$10,000,000

$200/unit

Variable COGS

$4,000,000

$80/unit

Fixed manufacturing overhead

$5,000,000

 

Variable S&A: Commission on Sales

4%

 

Fixed S&A

$200,000

 

The company has had a policy of having zero inventories at the end of each quarter. No further sales are possible during the year and all the units produced so far have been sold. The CEO is planning to produce items for inventory in the last week of December to meet the net operating income target.

How many units (nearest whole number) need to be additionally produced for inventory in the last week of December to meet the net operating income target if the sales commission is left unchanged at 4%?

a. 56,818

b. 4,348

c. 6,818

d. 50,000

Reference no: EM132802180

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