Felde Company had $150,000 of net income in 2011 when the s4elling price per uni

Question

Felde Company had $150,000 of net income in 2011 when the s4elling price per unit was $150, the variable costs per unit were $90, and the fixed costs were $570,000. Management expects per unit data and total fixed costs to remain the same in 2012. The president of Felde Company is under pressure from stockholders to increase net income by $60,000 in 2012.

Instructions

(a) Compute the number of units sold in 2011.

(b) Compute the number of units that would have to be sold in 2012 to reach the stockholders’ desired profit level.

(c) Assume that Felde Company sells the same number of units in 2012 as it did in 2011. What would the selling price have to be in order to reach the stockholders’ desired profit level?

Explanation / Answer

Profit as a function of units sold P(x) = 150x -90x - 570,000 150,000 = 150x -90x - 570,000 x = 12,000 There were 12,000 units sold

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