Holder Manufacturing had $125,000 of net income in 2015 when the selling price per unit was $100, the variable costs per unit were $70, and the fixed costs were $475,000. Management expects per unit data and total fixed costs to remain the same in 2016. The president of Holder Manufacturing is under pressure from stockholders to increase net income by $60,000 in 2016.
Instructions
A) Compute the number of units sold in 2015.
B) Compute the number of units that would have to be sold in 2016 to reach the stockholders' desired profit level.
C) Assume that Holder Manufacturing sells the same number of units in 2016 as it did in 2015. What would the selling price have to be in order to reach the stockholders' desired profit level.

Answer:

Holder Manufacturing

A. The number of units sold in 2015 is:

= 20,000 units

B. The number of units that would have to be sold in 2016 to reach the stockholders' desired profit level is:

= 22,000 units

C. The selling price to reach the stockholders' desired profit level, assuming that Holder Manufacturing sells the same number of units in 2016 as it did in 2015 is:

= $103 per unit.

Explanation:

a) Data and Calculations:

Net income in 2015 = $125,000

Selling price per unit = $100

Variable costs per unit = $70

Contribution per unit = $30

Fixed costs = $475,000

Number of units sold in 2015:

Contribution margin = Net income + Fixed costs

= $125,000 + $475,000 = $600,000

Number of units sold = $600,000/$30 = 20,000 units

For 2016:

Contribution margin = $660,000 ($600,000 + $60,000)

Number of units to be sold = 22,000

If units sold in 2016 = 20,000, selling price would be:

Contribution would be = $33 ($660,000/20,000)

Selling price = Variable cost + Contribution margin per unit

= $70 + $33 = $103

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b. A group of kids snuck into the theater through a back door when customers left after a show.
c. The box office cashier accidentally gives too much change to a customer.
d. The ticket taker admits his friends without tickets.

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Required:
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total OMR 7,000,000. If direct materials are OMR 2,000,000 and factory
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OMR 2,000,000 a
OMR 1,000,000 b
X
OMR 4,000,000
.c
OMR 3,000,000 d
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Windswept, Inc. 2017
Income Statement
($ in millions)
Net sales $10,200
Cost of goods sold 7,800
Depreciation 355
Earnings before interest and taxes $2,045
Interest paid 94 Taxable income $1,951
Taxes 585
Net income $ 1,366
Windswept, Inc. 2016 and 2017
Balance Sheets ($ in millions)
2016 2017 2016 2017
Cash $340 $360 Accounts payable $1,820 $1,680
Accounts rec. 1,050 950 Long-term debt 1,040 1,500
Inventory 1,820 1,740 Common stock 3,300 3,110
Total $3,210 $3,050 Retained earnings 620 870
Net fixed assets3,570 4,110
Total assets $6,780 $7,160 Total liab & equity $6,780 $7,160
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a. 497.4
b. 482.8
c. 583.5
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