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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.
Expert Solution
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.
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