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.

Question

Trevor Baxter

Business

8 February, 13:29

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.

+3

Answers (1)

Know the Answer?

Julien Pittman · Answer 1

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

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