Rankin Company had a net loss of $100,000 in 2010 when the selling price per unit was $20, the variable costs per unit were $12, and the fixed costs were $600,000. Management expects per unit data and total fixed costs to be the same in 2011. Management has set a goal of earning net income of $100,000 in 2011.
Instructions
(a) Compute the units sold in 2010.
(b) Compute the number of units that would have to be sold in 2011 to reach management's desired net income level.
(c) Assume that Rankin Company sells the same number of units in 2011 as it did in 2010. What would the selling price have to be in order to reach the target net income? Use the mathematical equation.

Question

Quizplus · Accepted Answer

The Answer of Rankin Company had a net loss of $100,000 in 2010 when the selling price per unit was $20, the variable costs per unit were $12, and the fixed costs were $600,000. Management expects per unit data and total fixed costs to be the same in 2011. Management has set a goal of earning net income of $100,000 in 2011.
Instructions
(a) Compute the units sold in 2010.
(b) Compute the number of units that would have to be sold in 2011 to reach management's desired net income level.
(c) Assume that Rankin Company sells the same number of units in 2011 as it did in 2010. What would the selling price have to be in order to reach the target net income? Use the mathematical equation.

Rankin Company Had a Net Loss of $100,000 in 2010