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 $164, the variable costs per unit were S104, 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 $63,600 in 2014. Compute the number of units sold in 2013. Compute the number of units that would have to be sold in 2014 to reach the stockholders' desired profit level. 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

Selling price per unit = 164

Variable cost per unit = 104

Contribution per unit = 60

Number of units sold in 2013 = Fixed cost + Profit / Contribution per unit

= 154200+573600 / 60 i.e 12130 units

Number of units to be sold in 2014 = 154200+63600+573600/60

= 13190 units

C) New selling price

Desired Profit = Sales - Variable cost - Fixed cost

217800 = (12130X) - ( 12130*104) - 573600

217800 = 12130X - 1261520 - 573600

217800+1261520+573600 = 12130X

X = 2052920/12130 i.e 169.24

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