Lin Corporation has a single product whose selling price is $135 per unit and wh

Question

Lin Corporation has a single product whose selling price is $135 per unit and whose variable expense is $54 per unit. The company's monthly fixed expense is $40,000 Required 1. Calculate the unit sales needed to attain a target profit of $8,600. (Do not round intermediate calculations.) 2. Calculate the dollar sales needed to attain a target profit of $9,800. (Round your intermediate calculations to the nearest whole number.) 1. Units sales to attain target profit 2. Dollar sales to attain target profit

Explanation / Answer

1. Unit contribution margin = Selling price - Unit variable expense = $135 - $54 = $81

Unit sales to attain target profit = (Target profit + Fixed expenses) / Unit contribution margin = ($8,600 + $40,000) / $81 = 600 units

2. Contribution margin ratio = (Selling price - Unit variable expense) / Contribution margin = ($135 - $54) / $135 = 60%

Dollar sales to attain target profit = (Target profit + Fixed expenses) / Contribution margin ratio = ($9,800 + $40,000) / 0.60 = $83,000

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