Tisdale Company reported the following results from sales of 5,000 units of Product A for June:
Sales $ \$ 200,000 $
Variable costs (120,000)
Fixed costs $\underline{(60,000)}$
Operating income $\underline{\$20,000}$

Assume that Tisdale increases the selling price of Product A by 10 percent in July.How many units of Product A would have to be sold in July to generate an operating income of $20,000?
A)4,000
B)4,300
C)4,545
D)5,000

Question

Tisdale Company reported the following results from sales of 5,000 units of Product A for June:
Sales                                                                          $ \$ 200,000 $
Variable costs                                                         (120,000)
Fixed costs                                                            $\underline{(60,000)}$
Operating income                                                  $\underline{\$20,000}$

Assume that Tisdale increases the selling price of Product A by 10 percent in July.How many units of Product A would have to be sold in July to generate an operating income of $20,000?
A)4,000
B)4,300
C)4,545
D)5,000

Quizplus · Accepted Answer

First, we need to calculate the new selling price of Product A after a 10% increase. 
New Selling Price = $200,000 / 5,000 units * 1.1 = $22 per unit

Next, we can calculate the total revenue that Tisdale will receive if they sell x units of Product A in July: 
Total Revenue = $22x

Using the contribution margin approach, we can calculate the operating income that Tisdale will generate if they sell x units of Product A in July: 
Operating Income = ($22x - $120,000 - $60,000) - $20,000

Solving for x: 
$22x - $180,000 = $20,000 
$22x = $200,000 
x = 9,090.91

Since Tisdale can only sell whole units of Product A, they would need to sell 4,545 units in July to generate an operating income of $20,000. Therefore, the correct answer is C.

Tisdale Company Reported the Following Results from Sales of 5,000 $200,000 \$ 200,000 $200,000

Tisdale Company Reported the Following Results from Sales of 5,000 $\$ 200,000$