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Lin Corporation has a single product whose selling price is $140 per unit and whose variable expense is $70 per unit. The company’s monthly fixed expense is $32,250. Required: 1. Calculate the unit sales needed to attain a target profit of $8,000. (Do not round intermediate calculations.) 2. Calculate the dollar sales needed to attain a target profit of $8,700. (Round your intermediate calculations to the nearest whole number.)

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Answer and Explanation:

1. The computation of the unit sales is shown below:

As we know that

Unit sales to attain the desired profit is

= (Fixed cost + desired profit) ÷ contribution margin per unit

= ($32,250 + $8,000) ÷ ($140 - $70)

= 575 units

2. And, the units sales is

Before this first determine the contribution margin ratio which is

Contribution margin ratio = Contribution margin ÷ sales × 100

= $70 ÷ $140 × 100

= 50%

now the dollar sales is

= (Fixed cost + desired profit) ÷ contribution margin ratio

= ($32,250 + $8,700) ÷ 50%

= $81,900

The unit sales is 575 units and dollar sales is $81,900.

Given that,

  • Selling price of single product is $140.
  • Variable expense per unit is $70.
  • Monthly fixed expense is $32,250.

1. Unit sales to attain target profit of $8,000.

Unit sales = ($32,250 + $8,000) [tex]\div[/tex] ($140 - $70)

= 575 units

2. Dollar sales to attain target profit of $8,700.

Dollar sales = (Fixed cost + Profit) [tex]\div[/tex] Contribution Margin Ratio

= [[tex]($32,250 + 8,700)[/tex] [tex]\div[/tex] ([tex]70[/tex][tex]\div[/tex][tex]\frac{140}{100}[/tex])]

= $81,900

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