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this information, what is Your Company's Your Company's expected net income when 5,000 units are sold? Use the in

this information, what is Your Company's Your Company's expected net income when 5,000 units are sold? Use the in

FINANCIAL ACCOUNTING
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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Using this information, what is Your Company's Your Company's expected net income when 5,000 units are sold? Use the information in red to figure out total fixed costs. Expected sales in units Sales price per unit 5,000 $20 3,750 Expected - Breakeven Margin of safety in units 35% Contribution margin ratio O A. $35,000 O B. $25,000 O C. $18,750 O D. $26,250 O E. $ 8,750
Transcribed Image Text:Using this information, what is Your Company's Your Company's expected net income when 5,000 units are sold? Use the information in red to figure out total fixed costs. Expected sales in units Sales price per unit 5,000 $20 3,750 Expected - Breakeven Margin of safety in units 35% Contribution margin ratio O A. $35,000 O B. $25,000 O C. $18,750 O D. $26,250 O E. $ 8,750
Expert Solution
Step 1

Option D Or $26250

Sales (5000 × $20)  $100000
Less : Variable Cost (1 - 0.35)  × Sales $65000
Contribution $35000
Less : Fixed Cost  $8750
Net Income $26250

Calculation of Contribution per Unit :-

Total Units sold 5000 units

Margin of safety units are 3750 

Therefore Break even Sales Units are 1250  (5000 - 3750) units. 

Break even Sales in Dollar 

=1250 units × $20 

=$25000

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