Cando Manufacturing makes lamps that retail at $200 each. The unit variable cost is $120, and the fixed costs are $720,000 per year. Cando can produce a maximum of 2,000 lamps per month. At what percent utilization would the monthly net income be $52,000?

Question

Quizplus · Accepted Answer

To achieve a monthly net income of $52,000, we first need to calculate the total required revenue. The fixed costs are $720,000 per year, which translates to $60,000 per month. To achieve a net income of $52,000, the total revenue needs to cover both the fixed costs and the desired net income: $60,000 (fixed costs) + $52,000 (desired net income) = $112,000.The contribution margin per lamp is the selling price minus the variable cost: $200 - $120 = $80. To find out how many lamps need to be sold to achieve the total required revenue of $112,000, we divide the total required revenue by the contribution margin per lamp: $112,000 / $80 = 1,400 lamps.To find the percent utilization, we divide the number of lamps needed by the maximum production capacity and then multiply by 100: (1,400 / 2,000) * 100 = 70%.

Cando Manufacturing Makes Lamps That Retail at $200 Each