Asked by Kevin Oxrider on Jun 07, 2024
Verified
Holder Manufacturing had $125000 of net income in 2015 when the selling price per unit was $100 the variable costs per unit were $70 and the fixed costs were $475000. Management expects per unit data and total fixed costs to remain the same in 2016. The president of Holder Manufacturing is under pressure from stockholders to increase net income by $60000 in 2016.
Instructions
(a) Compute the number of units sold in 2015.
(b) Compute the number of units that would have to be sold in 2016 to reach the stockholders' desired profit level.
(c) Assume that Holder Manufacturing sells the same number of units in 2016 as it did in 2015. What would the selling price have to be in order to reach the stockholders' desired profit level.
Variable Costs
Charges that are aligned with the scale of production or the extent of activities in an enterprise.
Fixed Costs
Constant expenses that a business incurs regardless of production volume, including leases and insurance, essential for financial planning and analysis.
Net Income
The total earnings of a company after subtracting all expenses, taxes, and losses.
- Recognize plans to achieve predetermined profit objectives by altering sales numbers, cost structures, and price points.
- Evaluate the consequences of shifts in expense frameworks on earnings.
Verified Answer
WS
Weston ShufordJun 13, 2024
Final Answer :
(a) Sales === Variable cost + Fixed cost + Target net income
$100X=$70X+$475,000+$125,000\$ 100 X = \$ 70 X + \$ 475,000 + \$ 125,000$100X=$70X+$475,000+$125,000
$30X=$600,000\$ 30 X = \$ 600,000$30X=$600,000
Or\mathrm { Or }Or
X=20,000X = 20,000X=20,000 units
Units sold in 2015=$475,000+$125,000$100−$70=20,0002015 = \frac { \$ 475,000 + \$ 125,000 } { \$ 100 - \$ 70 } = 20,0002015=$100−$70$475,000+$125,000=20,000 units
(b) Units sold in 2016=$475,000+$185,000∗$100−$70=22,0002016 = \frac { \$ 475,000 + \$ 185,000 ^ { * } } { \$ 100 - \$ 70 } = 22,0002016=$100−$70$475,000+$185,000∗=22,000 units
$$125,000+$60,000=$185,000\$ \$ 125,000 + \$ 60,000 = \$ 185,000$$125,000+$60,000=$185,000
(c) $475,000+$185,000x−$70=20,000\frac { \$ 475,000 + \$ 185,000 } { x - \$ 70 } = 20,000x−$70$475,000+$185,000=20,000 units where x=x =x= new selling price
$660,000=20,000X−$1,400,000$2,060,000X=20,000×X=$103\begin{aligned}\$ 660,000 & = 20,000 X - \$ 1,400,000 \\\$ 2,060,000 X & = 20,000 \times \\X & = \$ 103\end{aligned}$660,000$2,060,000XX=20,000X−$1,400,000=20,000×=$103
$100X=$70X+$475,000+$125,000\$ 100 X = \$ 70 X + \$ 475,000 + \$ 125,000$100X=$70X+$475,000+$125,000
$30X=$600,000\$ 30 X = \$ 600,000$30X=$600,000
Or\mathrm { Or }Or
X=20,000X = 20,000X=20,000 units
Units sold in 2015=$475,000+$125,000$100−$70=20,0002015 = \frac { \$ 475,000 + \$ 125,000 } { \$ 100 - \$ 70 } = 20,0002015=$100−$70$475,000+$125,000=20,000 units
(b) Units sold in 2016=$475,000+$185,000∗$100−$70=22,0002016 = \frac { \$ 475,000 + \$ 185,000 ^ { * } } { \$ 100 - \$ 70 } = 22,0002016=$100−$70$475,000+$185,000∗=22,000 units
$$125,000+$60,000=$185,000\$ \$ 125,000 + \$ 60,000 = \$ 185,000$$125,000+$60,000=$185,000
(c) $475,000+$185,000x−$70=20,000\frac { \$ 475,000 + \$ 185,000 } { x - \$ 70 } = 20,000x−$70$475,000+$185,000=20,000 units where x=x =x= new selling price
$660,000=20,000X−$1,400,000$2,060,000X=20,000×X=$103\begin{aligned}\$ 660,000 & = 20,000 X - \$ 1,400,000 \\\$ 2,060,000 X & = 20,000 \times \\X & = \$ 103\end{aligned}$660,000$2,060,000XX=20,000X−$1,400,000=20,000×=$103
Learning Objectives
- Recognize plans to achieve predetermined profit objectives by altering sales numbers, cost structures, and price points.
- Evaluate the consequences of shifts in expense frameworks on earnings.