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Narchie sells a single product for $50
Narchie sells a single product for $50. Variable costs are 60% of the selling price, and the
company has fixed costs that amount to $400,000. Current sales total 16,000 units.
46.
Narchie:
A.
will break-even by selling 8,000 units.
B.
will break-even by selling 13,333 units.
C.
will break-even by selling 20,000 units.
D.
will break-even by selling 1,000,000 units.
E.
cannot break-even because it loses money on every unit sold.
47.
Each unit that Narchie sells will:
A.
increase profit by $20.
B.
increase profit by $30.
C.
increase profit by $50.
D.
increase profit by some other amount.
E.
decrease profit by $5.
48.
In order to produce a target profit of $22,000, Narchie's dollar sales must total:
A.
$8,440.
B.
$21,100.
C.
$1,000,000.
D.
$1,055,000.
E.
an amount other than those above
Expert Solution
Computation of Required Sales to earn a target profit of $22,000:
Required Sales = (Fixed Cost+Target Profit)/Contribution Margin Ratio
Here,
Fixed Cost = $400,000
Target Profit = $22,000
Contribution Margin Ratio = (Sales price per unit - Variable cost per unit)/Sales price per unit = ($50 - ($50*60%))/$50 = 40%
Required Sales = ($400,000+$22,000)/40% = $1,055,000
So, the correct option is D "$1,055,000".
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