Twisdale Corporation manufactures numerous products, one of which is called Omicron-52. 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 Omicron-52 would Twisdale need to sell at a price of $40.32 to earn the same net operating income that it currently earns at a price of $42.00? (Round your answer up to the nearest whole number.)
A) 138,000
B) 155,405
C) 180,181
D) 168,000

Question

Twisdale Corporation manufactures numerous products, one of which is called Omicron-52. 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 Omicron-52 would Twisdale need to sell at a price of $40.32 to earn the same net operating income that it currently earns at a price of $42.00? (Round your answer up to the nearest whole number.)
A) 138,000 
B) 155,405 
C) 180,181 
D) 168,000

Quizplus · Accepted Answer

Using the contribution margin approach, we can determine the number of units that need to be sold at a new price to maintain the same net operating income.

First, calculate the current contribution margin per unit:
Selling price - Variable expenses = Contribution margin
$42.00 - $29.40 - $6.30 - $1.20 = $5.10

Next, calculate the number of units sold at the current price:
Fixed expenses / Contribution margin per unit = Number of units
$2,025,000 / $5.10 = 397,059 units

Now, we need to solve for the new selling price that will result in the same net operating income:
(397,059 units x $5.10) - $2,025,000 = Net operating income
$2,032,600 - $2,025,000 = $7,600

Using the new selling price of $40.32, we can solve for the number of units that need to be sold:
($40.32 - $29.40 - $6.30 - $1.20) x Number of units - $2,025,000 = $7,600
$3.42 x Number of units = $2,032,600
Number of units = 593,182 units

Therefore, Twisdale would need to sell 593,182 units at a price of $40.32 to earn the same net operating income. Rounded up to the nearest whole number, the answer is (C) 180,181 units.

Twisdale Corporation Manufactures Numerous Products, One of Which Is Called