Naylor Company had $154,200 of net income in 2013 when the selling price per uni

Question

Naylor Company had $154,200 of net income in 2013 when the selling price per unit was $163, the variable costs per unit were $103, and the fixed costs were $573,600. Management expects per unit data and total fixed costs to remain the same in 2014. The president of Naylor Company is under pressure from stockholders to increase net income by $61,200 in 2014.

(a) Compute the number of units sold in 2013.

(b) Compute the number of units that would have to be sold in 2014 to reach the stockholders’ desired profit level.

(c) Assume that Naylor Company sells the same number of units in 2014 as it did in 2013. What would the selling price have to be in order to reach the stockholders' desired profit level?

Explanation / Answer

Statement showing computations Particulars Amount Selling Price per Unit                          163.00 Variable Cost per unit                          103.00 Contribution per unit= 163 -103                            60.00 No of units Sold in 2013= FC+ Income = (573,600+ 154,200)/60                    12,130.00 No of units desired to be sold in 2014= FC+ Income = (573,600+ 154,200+61200)/60                    13,150.00 No of units in 2013                    12,130.00 Total cont desired =   (573,600+ 154,200+61200)                 789,000.00 Cont per unit desired = 789000/12130                            65.05 VC per unit                          103.00 SP per unit = 103 + 65.05                          168.05

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