My professor posts solutions however my classmates and I cannot figure out how h
ID: 2445166 • Letter: M
Question
My professor posts solutions however my classmates and I cannot figure out how he came up with the $15,400 units used in the first equation of the solution - 3 lines down under the "Explaination" he's not famous for answering emails. Anyone have any idea how he came up with this number? - We use his prior work to study for tests, which we have one tomorrow. Thanks!
Calculate the number of units ABC Company sold in year 2.
Correct answer
24,000
Explanation:
Use the break-even point to calculate the fixed costs in year 1:
Sales - Variable costs - Fixed costs = Net income
616,000 - (15,400 units x $15) - Fixed costs = 0
616,000 - 231,000 - Fixed costs = 0
Fixed costs = $385,000
Fixed costs in Year 2 = Fixed costs in Year 1 x 1.10
Fixed costs in Year 2 = 385,000 x 1.10 = $423,500
(19,250 units x $40) - (19,250 units x variable cost per unit) - 423,500 = 0
770,000 - (19,250 x variable cost per unit) - 423,500 = 0
19,250 x variable cost per unit = 346,500
Variable cost per unit = $18
(units sold x $40) - (units sold x $18) - 423,500 = 104,500
units sold x $22 = 528,000
units sold = 24,000 units
Correct answer
24,000
Explanation / Answer
Correct
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