Louder company manufacture a single product that sells for $80 per unit. Variable manufacturing costs are $50 per unit. Variable selling cost are 15% of the selling price. Annual fixed costs are estimated to be $140,000. What is the sales volume required to generate a profit of $22,000.

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BlackTom AI · Accepted Answer

Starting with the given data, I’ll lay out the key numbers involved in the calculation.

First, determine the per-unit variable costs: variable manufacturing cost is 50 per unit, and variable selling cost is 15% of the selling price. With a selling price of 80, the variable selling cost is 0.15 × 80 = 12 per unit. Therefore, total variable cost per unit = 50 + 12 = 62.

Next, compute the contribution margin per unit, which is selling price minus total variable cost: 80 − 62 = 18 per unit. This is the amount available to cover fixed costs and profit for each unit sold.

The company desires a profit of 22,000, and annual fixed costs are 140,000. To find the required sales volume, use the formula: required units = (Fixed costs + Target profit) / Contribution per unit. Substituting the values gives (140,000 + 22,000) / 18 = 162,000 / 18 = 9,000 units.

Thus, the sales volume needed to achieve the target profit is 9,000 units. Note that this result assumes the given price, cost structure, and no change in fixed costs or selling price, and it reflects the standard contribution approach to break-even plus profit calculations.

If you’d like, I can show a quick check by multiplying 9,000 units by the contribution per unit and comparing against fixed costs plus profit to confirm the result.

BUSMGT 713 Quiz 1.1

Louder company manufacture a single product that sells for $80 per unit. Variable manufacturing costs are $50 per unit. Variable selling cost are 15% of the selling price. Annual fixed costs are estimated to be $140,000. What is the sales volume required to generate a profit of $22,000.

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