Lindsay Company reported the following results from sales of 5,000 units for the month o? June: $$\begin{array} { | l | l | }
\hline \text { Sales } & \$ 200,000 \
\hline \text { Variable expenses } & 120,000 \
\hline \text { Fixed expenses } & 60,000 \
\hline
\end{array}$$ Assume that Lindsay increases the selling price of the product by 10% on July 1. How many units would have to be sold in July in order to generate a profit of $20,000?

Question

Lindsay Company reported the following results from sales of 5,000 units for the month o? June: $$\begin{array} { | l | l | } 
\hline \text { Sales } & \$ 200,000 \
\hline \text { Variable expenses } & 120,000 \
\hline \text { Fixed expenses } & 60,000 \
\hline
\end{array}$$ Assume that Lindsay increases the selling price of the product by 10% on July 1. How many units would have to be sold in July in order to generate a profit of $20,000?

Quizplus · Accepted Answer

To find the number of units needed to generate a $20,000 profit, first calculate the new selling price per unit: $200,000 / 5,000 units = $40 per unit. With a 10% increase, the new price is $44 per unit. The contribution margin per unit is $44 - ($120,000 / 5,000) = $20. Fixed expenses are $60,000. To achieve a $20,000 profit, the total contribution margin must be $80,000 ($60,000 fixed expenses + $20,000 profit). Therefore, $80,000 / $20 per unit = 4,000 units.

Lindsay Company Reported the Following Results from Sales of 5,000