Answered

erickson inc makes computer bags that sell for $20 each. for the coming year, management expects fixed costs to be $225000. variable costs are $14 per unit. compute the sales required to earn a net income of $150000, using the mathematical equation.



Answer :

sqdancefan

Answer:

  62,500 units

Step-by-step explanation:

You want the sales required for a net income of $150000 when fixed costs are $225000, variable costs are $14 per unit, and selling price is $20 per unit.

Net income

The net income will be the difference between revenue and cost for x units produced and sold:

  net income = revenue - cost

  net income = (revenue per unit)×units - (fixed cost + (cost per unit)×units)

  150000 = 20x -(225000 +14x)

  375000 = 6x . . . . . . . . . . . . . . . . . . . add 225000, simplify

  x = 375000/6 = 62500

Sales of 62,500 units are required to earn a net income of $150,000.