Answered Essay: Naylor Company had $153,600 of net income in 2016 when the selling price per unit was $155, the variabl

Naylor Company had $153,600 of net income in 2016 when the selling price per unit was $155, the variable costs per unit were $95, and the fixed costs were $574,000. Management expects per unit data and total fixed costs to remain the same in 2017. The president of Naylor Company is under pressure from stockholders to increase net income by $62,400 in 2017. Compute the number of units sold in 2016. (Round answer to 0 decimal places, e.g. 1,225.)

Expert Answer

 

Required contribution margin=(Fixed expenses+Target net income)

=($574000+$153600)=$727600

Let units sold be ‘x’.

Hence contribution margin=(Sales-Variable expenses)

=(155x-95x)=$60x

Hence 60x=727600

Hence x=units sold=(727600/60)

=12,127 units(Apprxox).

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