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Towing Company manufactures and sells a single product for $40 per unit. Variable costs are $30...

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Accounting

Towing Company manufactures and sells a single product for $40 per unit.Variable costs are $30 per unit and fixed costs total $168,000. During2019, the company sold 26,500 units of this product to customers. Inorder to improve profitability, the president of Towing Company believesthe following changes should be made in 2020:1. decrease the selling price of the product by 10%2. automate a portion of the production process which will reduce  variable costs by 5% per unit but will add an additional fixed  cost of $16,310 per year3. increase advertising by $49,420Assume these changes are made. A) Calculate the number of units that Towing Company must sell in 2020 in order to earn a net income that is 20% greater than the net income earned in 2019.

B) Calculate the number of units that Towing Companymust sell in 2020 in order to earn a target profit equal to 12% ofsales.

Answer & Explanation Solved by verified expert
4.4 Ratings (908 Votes)
Computation of Net Income Earn in 2019 Per Unit Amount Volume 26500 Sales 4000 106000000 Less Variable cost 3000 79500000 Contribution 1000 26500000 Less Fixed cost 16800000 Net Income    See Answer
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