Question

Flannigan Company manufactures and sells a single product that sells for $640 per unit; variable costs are $352. Annual fixed costs are $985,500. Current sales volume is $4,390,000. Flannigan Company management targets an annual pre-tax income of $1,315,000. Compute the unit sales to earn the target pre-tax net income.

Answer 1

Answer:

Target Contribution margin=Fixed costs+Target profits

=(985500+1315000)=$2,300,500

Contribution margin=Sales-Variable costs

=(640-352)=$288 per unit

Hence target sales=$2,300,500/288

=7988(Approx)

Explanation:

Answer 2

Answer:

7,987 units

Explanation:

We employ a mathematical approach to answer this question.

Firstly, we calculate the Target income sales in unit. This is mathematically equal to (Fixed cost + Target income)/contribution per unit

According to the question,

Fixed cost = $985,500

Target income = $1,315,000

Contribution per unit= Sales piece - variable cost per unit = 640-352 = 288

Target income sales in unit = (985,500+1,315,000)/288 = (2,300,500)/288 = 7,987