Naylor Company had $153,600 of net income in 2013 when the selling price per uni

Question

Naylor Company had $153,600 of net income in 2013 when the selling price per unit was $164, the variable costs per unit were $104, and the fixed costs were $571,200. 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.

12080 units*

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

_____________units?

Explanation / Answer

a)contribution per unit = 164 - 104 = 60

Units sold = (fixed cost +net income) /contribution per unit

                 = (571200 +153600 )/ 60

                 = 724800 /60

                = 12080 units

b)Desired profit for 2014 = 153600 +61200= 214800

Units to sold = (Fixed cost +desired income) / contribution per unit

                    = (571200 + 214800)/ 60

                   = 786000/60

                  = 13100 units

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