Vernon Corporation is a manufacturing company that makes smallelectric motors it sells for $52...

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Accounting

Vernon Corporation is a manufacturing company that makes smallelectric motors it sells for $52 per unit. The variable costs ofproduction are $28 per motor, and annual fixed costs of productionare $576,000. Required How many units of product must Vernon makeand sell to break even? How many units of product must Vernon makeand sell to earn a $72,000 profit? The marketing manager believesthat sales would increase dramatically if the price were reduced to$46 per unit. How many units of product must Vernon make and sellto earn a $72,000 profit, if the sales price is set at $46 perunit?

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4.1 Ratings (432 Votes)

1)Units to breakeven = Fixed cost /(price- variable cost)

= 576000/(52-28)

= 576000/ 24

= 24000 units

2)Target unit sales =[fixed cost+ target profit ]/[price-variable cost]

=[576000+72000]/[52-28]

= 648000/24

= 27000 units

3)Target unit sales = [576000+72000]/[46-28]

= 648000/18

= 36000 units

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In: AccountingVernon Corporation is a manufacturing company that makes smallelectric motors it sells for $52 per...Vernon Corporation is a manufacturing company that makes smallelectric motors it sells for $52 per unit. The variable costs ofproduction are $28 per motor, and annual fixed costs of productionare $576,000. Required How many units of product must Vernon makeand sell to break even? How many units of product must Vernon makeand sell to earn a $72,000 profit? The marketing manager believesthat sales would increase dramatically if the price were reduced to$46 per unit. How many units of product must Vernon make and sellto earn a $72,000 profit, if the sales price is set at $46 perunit?