Kydell Corporation reported the following results from the sale of 6,000 units in March: sales $300,000, variable costs $180,000, fixed costs $90,000, and operating income $30,000.Assume that Kydell increases the selling price by 10% on April 1.How many units will have to be sold in April to maintain the same level of operating income?

Question

Quizplus · Accepted Answer

To maintain the same operating income, the contribution margin must remain the same. The new selling price is $55 (10% increase from $50). The contribution margin per unit is now $25 ($55 - $30 variable cost). To achieve $30,000 operating income, Kydell needs to cover $90,000 fixed costs and $30,000 operating income, totaling $120,000. Dividing $120,000 by the new contribution margin of $25 gives 4,800 units.

Kydell Corporation Reported the Following Results from the Sale of 6,000