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26 September, 10:33

Fanning Company incurs annual fixed costs of $104,220. Variable costs for Fanning's product are $26.40 per unit, and the sales price is $40.00 per unit. Fanning desires to earn an annual profit of $60,000.

Required

Determine the sales volume in dollars and units required to earn the desired profit.

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  1. 26 September, 11:26
    0
    Contribution margin per unit = 40-26.40 = 13.60

    Contribution margin ratio = 13.6/40 = 34%

    a) Sales in dollars to earn desired profit = (Fixed cost+Desired profit) / Contribution margin ratio = (104220+60000) /.34 = 483000

    b) Sales in volume in units = 483000/40 = 12075 Units
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