Felde Company had $140,030 of net income in 2011 when the selling price per unit

Question

Felde Company had $140,030 of net income in 2011 when the selling price per unit was $160, the variable costs per unit were $83, and the fixed costs were $709,280. Management expects per unit data and total fixed costs to remain the same in 2012. The president of Felde Company is under pressure from stockholders to increase net income by $214,830 in 2012.


Compute the number of units sold in 2011.

Compute the number of units that would have to be sold in 2012 to reach the stockholders' desired profit level.

Assume that Felde Company sells the same number of units in 2012 as it did in 2011. What would the selling price have to be in order to reach the stockholders' desired profit level? (Round answer to 0 decimal places, e.g. 125.)

Explanation / Answer

units sold in 2011 : n (say)

net income :  140,030 = 160n - 83n - 709,280

=> n = 11030 units. sold in 2011

for the profit of 214,830 , the units to be sold :

= 214,830  = 160n - 83n - 709,280 = 12002 units in 2012 to be sold for desired profit.

for 11030 to be sold for the same profit as in 2012, the selling price (m) would be :

214,830  = m(11030) - 83(11030) - 709,280

=> m = $ 166.78

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