Hayduke Corporation reported the following results from the sale of 5000 units in May: sales $300000 variable costs $180000 fixed costs $90000 and net income $30000. Assume that Hayduke increases the selling price by 5% on June 1. How many units will have to be sold in June to maintain the same level of net income?
A) 4444.
B) 4600.
C) 4750.
D) 5000.

Question

Quizplus · Accepted Answer

The original selling price per unit is $300,000 / 5,000 units = $60. With a 5% increase, the new selling price is $60 * 1.05 = $63. The contribution margin per unit originally is $60 - ($180,000 / 5,000) = $60 - $36 = $24. The fixed costs remain at $90,000, and to achieve the same net income of $30,000, total contribution margin needed is $90,000 + $30,000 = $120,000. With the new selling price, the variable cost per unit remains the same ($36), so the new contribution margin per unit is $63 - $36 = $27. The number of units needed to sell to achieve the same net income is $120,000 / $27 = 4,444.44, which rounds down to 4,444 units because you can't sell a fraction of a unit.

Hayduke Corporation Reported the Following Results from the Sale of 5000