During 2016, Waxley Corporation reported total revenues of $891,640 and profit of $91,486.Fixed costs were $332,043, and 44,582 units were sold.Costs and prices are expected to stay the same in 2017.Waxley expects to sell 50,000 units.How much is the company's budgeted profit for 2017?

Question

Quizplus · Accepted Answer

The budgeted profit for 2017 can be calculated by first determining the contribution margin per unit and then applying it to the expected sales volume. The contribution margin per unit is found by subtracting the variable cost per unit from the selling price per unit. Since the total revenues and profit are given for 2016, we can calculate the total variable costs (TVC) for 2016 as follows: TVC = Total Revenues - Fixed Costs - Profit = $891,640 - $332,043 - $91,486 = $468,111. The variable cost per unit for 2016 is then $468,111 / 44,582 units = $10.50 per unit (approximately). Assuming costs and prices stay the same in 2017, the total variable costs for 2017 would be 50,000 units * $10.50 = $525,000. The total revenue for 2017 can be calculated by using the 2016 average selling price per unit, which is $891,640 / 44,582 units = $20 per unit (approximately). Therefore, the total revenue for 2017 would be 50,000 units * $20 = $1,000,000. The budgeted profit for 2017 is then Total Revenue - Fixed Costs - Total Variable Costs = $1,000,000 - $332,043 - $525,000 = $142,957.

During 2016, Waxley Corporation Reported Total Revenues of $891,640 and Profit