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How many units will have to be sold to meet target profit

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Reference no: EM132517973

Dright Products. Inc., manufactures and sells a specialized cordless telephone for high electromagnetic radiations environment. The company's contribution format income statement for the most recent years is given below

                                                    Total                            Per unit                       % of  sales
Sales (20,000 units)          $ 1,200,000                   $ 60                            100%
Variables expenses              $ 900,000                      $ 45                            ?
Contribution margin                 $300,000                   $ 15                             ?
Fixed expenses                       250,000
Net Operating Income                 50,000

Management is anxious to increase the company's profit and has asked for an analysis of a number of items.

Answers the following questions :

Question 1: Compute the company's CM ration and variable expense ration

Question 2: Compute the company's break even point in both units and sales dollars. Use the equation method!

Question 3: Assume that sales increase by $700,000 next year. If cost behavior patterns remain unchanged, by how much will the company's net operating income increase? use the CM ratio to compute the answer

Question 4: Refer to the original data. Assume that next year Management wants the company to earn the profit at least $150,000. How many units will have to be sold to meet this target profit?

Reference no: EM132517973

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