If FP sells the toaster ovens for $16 each, how many units will it have to sell to make a profit of $54,000 before taxes?Units to be sold Flounder Possible Inc. (FP) is a manufacturer of toaster ovens. To improve control over operations, the president of FP wants to beginusing a flexible budgeting system, rather than using only the current master budget. The following data are available for FP's expectedcosts at production levels of 81,000, 90,000, and 99,000 units.Variable costsManufacturing$5 per unitAdministrative$3 per unitSelling$3 per unitFixed costsManufacturing$144,000Administrative$72,000

Solution: Contribution margin per unit = sales price - variable costs = 16 - (5+3+3)= 16 - 11 = $5…

Answered: Variable costs Manufacturing $5 per…

Variable costs Manufacturing $5 per unit Administrative $3 per unit Selling $3 per unit Fixed costs Manufacturing $144,000 Administrative $72,000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Pricing

Pricing is used as a term in finance and economics, pricing is the process of fixing a value for a product or a service. Pricing establishes a value for a product or service that the customer has to pay. A business can choose from different strategies while deciding to set prices.

Question

If FP sells the toaster ovens for $16 each, how many units will it have to sell to make a profit of $54,000 before taxes?
Units to be sold

Flounder Possible Inc. (FP) is a manufacturer of toaster ovens. To improve control over operations, the president of FP wants to begin
using a flexible budgeting system, rather than using only the current master budget. The following data are available for FP's expected
costs at production levels of 81,000, 90,000, and 99,000 units.
Variable costs
Manufacturing
$5 per unit
Administrative
$3 per unit
Selling
$3 per unit
Fixed costs
Manufacturing
$144,000
Administrative
$72,000

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Sales revenue Variable costs: Production Administrative Contribution margin Fixed costs Operating profit Status Quo 45,000 Units $ 1,170,000.0 X S $ $ GA 607,500 X 112,500 X 45,000.0 X $ 292,500.0 X 63,000.0 X S Costs and Revenues (Thousands of Dollars) Alternative 55,000 Units 1,370,000.0 $ 200,000.0 higher Difference 742,500 X 135,000 higher 112,500 X none 515,000.0 $ 65,000.0 higher 292,500.0 X none 128,000.0 $ 65,000.0 higher Required B > < Required A