Quigley Glass Industries sells glass vases at a wholesale price of $2.50 per unit.The variable cost is $1.75 per unit.Monthly ﬁxed costs are $7,500.If Quigley's current sales are 25,000 units per month, and Quigley wants to increase operating income by 20%, how many additional units should be sold (to the nearest unit)?

Question

Quizplus · Accepted Answer

To increase operating income by 20%, calculate the current operating income, then find the target income and determine the additional units needed. Current operating income is (25,000 * ($2.50 - $1.75)) - $7,500 = $11,250. A 20% increase is $11,250 * 1.2 = $13,500. The additional income needed is $13,500 - $11,250 = $2,250. Each additional unit contributes $0.75 ($2.50 - $1.75) to income, so $2,250 / $0.75 = 3,000 additional units are needed.

Quigley Glass Industries Sells Glass Vases at a Wholesale Price