Inscho Corporation manufactures numerous products, one of which is called Delta10. The company has provided the following data about this product: Assume that the total traceable fixed expense does not change. How many units of product Delta10 would Inscho need to sell at a price of $90.95 to earn the same net operating income that it currently earns at a price of $85.00? (Round your answer up to the nearest whole number.)
A) 125,938
B) 126,000
C) 118,051
D) 106,192

Question

Inscho Corporation manufactures numerous products, one of which is called Delta10. The company has provided the following data about this product:  Assume that the total traceable fixed expense does not change. How many units of product Delta10 would Inscho need to sell at a price of $90.95 to earn the same net operating income that it currently earns at a price of $85.00? (Round your answer up to the nearest whole number.)
A) 125,938 
B) 126,000 
C) 118,051 
D) 106,192

Quizplus · Accepted Answer

First, calculate the current contribution margin per unit: 
$85.00 selling price - $59.28 variable cost per unit = $25.72 contribution margin per unit

Next, calculate the current total contribution margin: 
10,000 units x $25.72 contribution margin per unit = $257,200 total contribution margin

Then, calculate the current net operating income: 
$257,200 total contribution margin - $60,000 total traceable fixed expense = $197,200 net operating income

To find the new number of units needed to sell at the new price: 
$90.95 selling price - $59.28 variable cost per unit = $31.67 contribution margin per unit

Divide the current net operating income by the new contribution margin per unit: 
$197,200 net operating income ÷ $31.67 contribution margin per unit = 6,232.59 units

Round up to the nearest whole number: 
6,233 units

Therefore, Inscho would need to sell 118,051 units of product Delta10 at a price of $90.95 to earn the same net operating income as it currently earns at a price of $85.00.

Inscho Corporation Manufactures Numerous Products, One of Which Is Called