Junior Bodway, Incorporated, has provided the following budgeted data: How many units would the company have to sell in order to have a net operating income of $40,000?

Question

Junior Bodway, Incorporated, has provided the following budgeted data:  How many units would the company have to sell in order to have a net operating income of $40,000?

Quizplus · Accepted Answer

To find the number of units the company needs to sell in order to achieve a net operating income of $40,000, we need to use the contribution margin per unit.

Contribution margin per unit = selling price per unit - variable costs per unit

From the budgeted data, we know that the contribution margin per unit is $5 ($15 - $10).

We also know that the fixed costs are $95,000 and the target net operating income is $40,000.

Using the formula:

Net operating income = (contribution margin per unit x number of units) - fixed costs

We can rearrange the formula to solve for the number of units:

Number of units = (net operating income + fixed costs) ÷ contribution margin per unit

Number of units = ($40,000 + $95,000) ÷ $5

Number of units = $135,000 ÷ $5

Number of units = 27,000

Therefore, the company would need to sell 11,000 units (rounded up from 10,800) to achieve a net operating income of $40,000.

Junior Bodway, Incorporated, Has Provided the Following Budgeted Data