Question

Naylor Company had $153,600 of net income in 2016 when the selling price per unit was $155, the variable costs per unit were $95, and the fixed costs were $574,000. Management expects per unit data and total fixed costs to remain the same in 2017. The president of Naylor Company is under pressure from stockholders to increase net income by $62,400 in 2017. Correct answer. Your answer is correct. Compute the number of units sold in 2016. (Round answer to 0 decimal places, e.g. 1,225.)

Need help with: Compute the number of units that would have to be sold in 2017 to reach the stockholders’ desired profit level.

Answer 1

Answer:

Units in 2016:

X=12,126.66 units≅12,127 units in 2016.

Units in 2017:

Y=13,166.667 units≅13,167 units in 2017.

Explanation:

Computing the number of units sold in 2016:

Net income in 2016=$153,600

Selling price per unit=$155

Variable cost per unit=$95

Fixed costs in 2016=$574,000

Let say number of units to be X:

Equation from above data:

$\ 153,600=(\ 155-\ 95)X-\ 574,000\\\ 727,600=60X$

$X=\frac{\ 727,600}{\ 60}$

X=12,126.66 units≅12,127 units in 2016.

Computing the number of units sold in 2017:

Net Income in 2017=$153,600+$62,400

Net Income in 2017=$216,000

Selling price per unit=$155

Variable cost per unit=$95

Fixed costs in 2017=$574,000

Let say number of units to be Y:

Equation from above data:

$\ 216,000=(\ 155-\ 95)Y-\ 574,000\\\ 790000=60Y$

$Y=\frac{\ 790000}{\ 60}$

Y=13,166.667 units≅13,167 units in 2017.