If the selling price is reduced by 5%,variable expenses reduced by $1.00,and fixed expenses increased to a total of $38,400,how many units would need to be sold to earn a net income of $21,000?

Question

Quizplus · Accepted Answer

To solve this problem, we need to use the formula:
Net Income = (Selling price - Variable cost per unit) x Quantity - Fixed Expenses

Let's find the new values after the given changes:
- Selling price reduced by 5%: $10.00 x 0.95 = $9.50
- Variable expenses reduced by $1.00: $4.00 - $1.00 = $3.00
- Fixed expenses increased to a total of $38,400

Now we can plug in these values along with the net income goal of $21,000 and solve for the quantity:
$21,000 = ($9.50 - $3.00) x Q - $38,400
$21,000 + $38,400 = $6.50 x Q
$59,400 = $6.50 x Q
Q = 9,120 ÷ 6.50
Q = 2,700 units

Thus, the answer is C) 2,700 units.

If the Selling Price Is Reduced by 5%,variable Expenses Reduced