Rachal Corporation produces and sells a single product whose selling price is $150.00 per unit and whose variable expense is $57.00 per unit. The company's monthly fixed expense is $381,300. Required:
a. Assume the company's monthly target profit is $9,300. Determine the unit sales to attain that target profit. Show your work!
b. Assume the company's monthly target profit is $18,600. Determine the dollar sales to attain that target profit. Show your work!

a) if the company's monthly target profit is $9,300, 4,200 units sales is needed

b) if the company's monthly target profit is $18,600, 4,300 units sales is needed

Explanation:

Using  The Contribution Margin Approach:  

Contribution Margin = Sales expense - variable expense

=$150.00 - $57.00

=$93

Contribution Margin Ratio= Contribution Margin/ sales expense  x 100

=93/150 x 100

= 62%

Assume the company's monthly target profit is $9,300.

A) Sales to attain the target profit = [(Fixed expenses + Target profit) ÷ Contribution Margin  ratio]

= ($381,300. + $9,300) ÷ 0.62

$390,600 ÷ 0.62

= $630,000

No. of units to be sold =Sales to attain the target profit/ selling price

$630,000/$150.00

=4,200 units

Assume the company's monthly target profit is $18,600

B) Sales to attain the target profit = [(Fixed expenses + Target profit) ÷ Contribution Margin  ratio]

= ($381,300. + $18,600 )÷ 0.62

$399,900 ÷ 0.62

= $645,000

No. of units to be sold =Sales to attain the target profit/ selling price

$645,000/$150.00

=4,300 units

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