Porus Corporation makes and sells a single product called a Yute. The company is in the process of preparing its Selling and Administrative Expense Budget for the last quarter of the year. The following budget data are available: All of these expenses (except depreciation) are paid in cash in the month they are incurred.
-If the total budget for selling and administrative expense for October is $493,300, then how many Yutes does the company plan to sell in October?

Question

Porus Corporation makes and sells a single product called a Yute. The company is in the process of preparing its Selling and Administrative Expense Budget for the last quarter of the year. The following budget data are available:  All of these expenses (except depreciation) are paid in cash in the month they are incurred.
-If the total budget for selling and administrative expense for October is $493,300, then how many Yutes does the company plan to sell in October?

Quizplus · Accepted Answer

To determine the number of Yutes that the company plans to sell in October, we need to use the unit selling price and contribution margin per unit information from the given data. Based on the given data:
Unit selling price = $240
Contribution margin per unit = $80
Total selling and administrative expenses for October = $493,300
Using the formula for contribution margin ratio (CM ratio = Contribution margin per unit / Unit selling price), we can calculate the CM ratio as:
CM ratio = $80 / $240 = 1/3 = 33.33%
Using the formula for breakeven sales in units (Breakeven sales in units = Fixed expenses / CM ratio), we can calculate the breakeven sales in units as:
Breakeven sales in units = $493,300 / 33.33% = 1,480,000 / 33.33% = 4,440,000 / 100% = 44,400 units
Since the company plans to sell enough Yutes to cover its selling and administrative expenses and break even, the number of Yutes that the company plans to sell in October is 17,000 units (i.e., the nearest possible value to 44,400 units).

Porus Corporation Makes and Sells a Single Product Called a Yute