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Homework answers / question archive / A watch manufacturer producing and selling affordable watches has the following sales and cost information: Selling price per unit $80 Variable cost per unit $32 Fixed cost is estimated to be $108,000 per quarter
A watch manufacturer producing and selling affordable watches has the following sales and cost information:
Selling price per unit $80
Variable cost per unit $32
Fixed cost is estimated to be $108,000 per quarter.
Desired quarterly income is estimated at $96,000
Required: Calculate the number of watches to be sold each quarter to earn the desired income.
Computation of Number of watches to be sold each quarter to earn the desired income:
Required Sales in Units = (Fixed Cost + Desired Income)/Contribution Margin per Unit
Here,
Contribution Margin per Unit = Sales Price per Unit - Variable Cost per Unit = $80 - $32 = $48
Required Sales in Units = ($108,000+$96,000)/$48 = 4,250 watches
So, Number of watches to be sold each quarter to earn the desired income are 4,250.
