Curtis Company anticipates selling 10,000 units next year.The company wants to earn an operating income equal to 10% of sales.If variable expenses are $12 per unit,and fixed expenses total $78,000 per year,what selling price must be established to achieve the desired level of operating income?

Question

Quizplus · Accepted Answer

To achieve the desired operating income, the selling price must cover variable costs, fixed costs, and the target profit. The target profit is 10% of sales, so if sales are 10,000 units, the sales revenue is 10,000 * Selling Price. The equation is: (Selling Price - $12) * 10,000 - $78,000 = 0.10 * (Selling Price * 10,000). Solving this gives a selling price of $22 per unit.

Curtis Company Anticipates Selling 10,000 Units Next Year