How many units will the company have to sell next year

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Question - A company manufactures a product that sells for $25 per unit. At present, the product is manufactured in a factory that mostly uses direct labor workers. The variable expenses are $15 per unit and the direct labor cost makes up 60% of variable expenses.

Last year, that company sold 62,000 units of its product and gave the following results

Sales (62,000 balls) $1,550,000

Variable expenses 930,000

Contribution margin 620,000

Fixed expenses 426,000

Net operating income $194,000

This same company considers building a new and high-tech factory. The new factory would reduce variable expenses per unit by 40%, but would double the company's fixed expenses per year due to investment in fixed assets.

If the new factory is built, how many units will the company have to sell next year to earn the same net operating income, $194,000, as last year?

Reference no: EM132896398

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