The president believes it would be a mistake to change the unit selling price. Instead, he wants to use less costly raw materials, thereby reducing unit cost by 70 cents. How many units would have to be sold next year to earn target profit of $30,200? WHITNEY COMPANYIncome StatementFor the Year Ended December 31Sales (45,000 units at $10 per unit) .Less cost of goods sold:$450,000Direct materials$90,000Direct labor .78,30098,500Manufacturing overhead266,800Gross margin ....Less operating expenses:Selling expenses:183,200Variable:Sales commissions$27,000Shipping5,40032,400Fixed (advertising, salaries)120,000Administrative:Variable (billing and other)Fixed (salaries and other)1,80048,000202,200Net operating loss$ (19,000)

Cost volume profit analysis:- Cost volume profit analysis is defined as the analysis, which shows…

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Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter2: Basic Cost Management Concepts

Section: Chapter Questions

Problem 22E: Ellerson Company provided the following information for the last calendar year: During the year,...

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The president believes it would be a mistake to change the unit selling price. Instead, he wants to use less costly raw materials, thereby reducing unit cost by 70 cents. How many units would have to be sold next year to earn target profit of $30,200?

WHITNEY COMPANY
Income Statement
For the Year Ended December 31
Sales (45,000 units at $10 per unit) .
Less cost of goods sold:
$450,000
Direct materials
$90,000
Direct labor .
78,300
98,500
Manufacturing overhead
266,800
Gross margin ....
Less operating expenses:
Selling expenses:
183,200
Variable:
Sales commissions
$27,000
Shipping
5,400
32,400
Fixed (advertising, salaries)
120,000
Administrative:
Variable (billing and other)
Fixed (salaries and other)
1,800
48,000
202,200
Net operating loss
$ (19,000)

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