Blanchard Company manufactures a single product that sells for $240 per unit and
ID: 2543914 • Letter: B
Question
Blanchard Company manufactures a single product that sells for $240 per unit and whose total variable costs are $180 per unit. The company’s annual fixed costs are $954,000. Management targets an annual pretax income of $1,500,000. Assume that fixed costs remain at $954,000.
(1) Compute the unit sales to earn the target income. Choose Numerator: / Choose Denominator: = Units to Achieve Target / = Units to achieve target (2) Compute the dollar sales to earn the target income. Choose Numerator: / Choose Denominator: = Dollars to Achieve Target / = Dollars to achieve target
Explanation / Answer
(1) Contribution Margin Per Unit = Selling Price Per Unit -Variable Cost Per Unit
= $ 240 - $ 180
= $ 60
Required Contribution = Fixed Cost + Required Profit
= $ 954,000 + $ 1,500,000
= $ 2,454,000
Hence, Units sales required to earn the target income=
(2)
Contribution Margin Ratio = Contribution Margin Per Unit / Selling Price Per Unit *100
= $ 60 / $ 240 *100
Required Contribution = Fixed Cost + Required Profit
= $ 954,000 + $ 1,500,000
= $ 2,454,000
Hence, Dollar sales required to earn the target income=
Choose Numerator / Choose Denominator = Units to Achieve Target Required Contribution / Required Contribution Margin Per Unit = Units to achieve target $ 2,454,000 / $ 60 = 40,900 UnitsRelated Questions
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