Answer:a) if the company's monthly target profit is $9,300, 4,200 units sales is needed
b) if the company's monthly target profit is $18,600, 4,300 units sales is needed
Explanation:
Using The Contribution Margin Approach:
Contribution Margin = Sales expense - variable expense
=$150.00 - $57.00
=$93
Contribution Margin Ratio= Contribution Margin/ sales expense x 100
=93/150 x 100
= 62%
Assume the company's monthly target profit is $9,300.
A) Sales to attain the target profit = [(Fixed expenses + Target profit) ÷ Contribution Margin ratio]
= ($381,300. + $9,300) ÷ 0.62
$390,600 ÷ 0.62
= $630,000
No. of units to be sold =Sales to attain the target profit/ selling price
$630,000/$150.00
=4,200 units
Assume the company's monthly target profit is $18,600
B) Sales to attain the target profit = [(Fixed expenses + Target profit) ÷ Contribution Margin ratio]
= ($381,300. + $18,600 )÷ 0.62
$399,900 ÷ 0.62
= $645,000
No. of units to be sold =Sales to attain the target profit/ selling price
$645,000/$150.00
=4,300 units
