Must show work Maxwell Company manufactures and sells a single product. Price an
ID: 2533787 • Letter: M
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Must show work
Maxwell Company manufactures and sells a single product. Price and cost data regarding Maxwell's product and operations for fiscal year 2016 are as follows (presented under absorption or full costing) Revenue (120,000 units) Less: Cost of sales S3,000,000 Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead S1,320,000 600,000 300,000 192,000 2,412,000 Gross margin Less: Variable selling expenses S588,000 S156,000 Fixed selling and administrative expenses 276,000 432,000 Net income S156,000 Required a. Compute the number of units required to be produced and sold in order to earn direc?t costing profits of $260,000 in 2017; you may assume that in 2017, fixed costs, as well as per unit variable cost and (per unit) selling prices are the same as for fiscal year 2016Explanation / Answer
Sales price per unit = (3000000/120000) = 25 per unit
Variable cost per unit = (1320000+600000+300000+156000)/120000 = 19.80 per unit
Fixed cost = 192000+276000 = 468000
Required No of units = (468000+260000)/(25-19.80 ) = 140000 Units
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