Blanchard Company manufactures a single product that sells for $160 per unit and whose total variable costs are $128 per unit. The company’s annual fixed costs are $464,000. Management targets an annual pretax income of $800,000.

Blanchard Company manufactures a single product that sells for $160 per unit and whose total variable costs are $128 per unit. The company’s annual fixed costs are $464,000. Management targets an annual pretax income of $800,000.

Explanation:

1.

		(Fixed costs + Target income)
Unit sales at target income	=
		Contribution margin/unit

 

		($464,000 + 800,000)
	=
		$32

=

39,500 units

2.

		(Fixed costs + Target income)
Dollar sales at target income	=
		Contribution margin ratio

		($464,000 + 800,000)
	=
		20%

=

$6,320,000