The Allen Company had the following income statement for the month of July 2004: What is the sales volume required to earn a profit of £9,000?

A) 3,300 units
B) 10,000 units
C) 7,300 units
D) 4,300 units

Question

The Allen Company had the following income statement for the month of July 2004: What is the sales volume required to earn a profit of £9,000?

A) 3,300 units 
B) 10,000 units 
C) 7,300 units 
D) 4,300 units

Quizplus · Accepted Answer

To calculate the sales volume required to earn a profit of £9,000, we need to use the following formula:

(Sales volume * Selling price) - (Variable costs per unit * Sales volume) - Fixed costs = Profit

We know that the fixed costs are £12,700, the variable costs per unit are £5.50, and the profit required is £9,000. We can substitute these values into the formula and solve for the sales volume:

(Sales volume * £35) - (£5.50 * Sales volume) - £12,700 = £9,000
£29.50 * Sales volume = £21,700
Sales volume = £21,700 ÷ £29.50
Sales volume = 734.75 or 7,300 units (rounded to the nearest whole unit)

Therefore, the answer is C.

The Allen Company Had the Following Income Statement for the Month