I am struggling with this question I think I am making it mo

I am struggling with this question, I think I am making it more difficult, please help guide me with the 4 segments of this question

thank you

onic Charge, is a newly organized manufacturing business that plans to manufacture and sell 60,000 units per year of a new produc The following estimates have been made of the company\'s costs and expenses (other than income taxes) Variable per Unit Fixed Manufacturing costs Direct naterials Direct labor Manufacturing overhead s 25 15 s see,ee0 Period costs: Selling expenses Adninistrative expenses 3e8,806 Totals 8e, eeg Required: a. What should the company establish as the sales price per unit if it sets a target of earning an operating income of $700,000 by producing and selling 60,000 units during the first year of operations? (Hint: First compute the required contribution margin per unit.) b. At the unit sales price computed in part a. how many units must the company produce and sell to break even? (Assume all units produced are sold.) c. What wil be the margin of safety (in dollars) if the company produces and sells 60,000 units at the sales price computed in part a? d. Assume that the marketing manager thinks that the price of this product must be no higher than $60 to ensure market penetration. Will setting the sales price at $60 enable lonic Charge to break even, given the plans to manufacture and sell 60,000 units? Complete this question by entering your answers in the tabs below Required A Required B Required C Required D ?PrRY 1or 4H? Next > acer

Solution

Answer a.

Variable Cost per unit = $50
Fixed Costs = $800,000
Operating Income = $700,000
Unit Sales = 60,000

Operating Income = (Selling Price - Variable Cost per unit) * Unit Sales - Fixed Costs
$700,000 = (Selling Price - $50) * 60,000 - $800,000
$1,500,000 = (Selling Price - $50) * 60,000
Selling Price - $50 = $25
Selling Price = $75

Answer b.

Contribution Margin per unit = Selling Price - Variable Cost per unit
Contribution Margin per unit = $75 - $50
Contribution Margin per unit = $25

Breakeven Point in unit = Fixed Costs / Contribution Margin per unit
Breakeven Point in unit = $800,000 / $25
Breakeven Point in unit = 32,000

Answer c.

Breakeven Point in dollars = Breakeven Point in unit * Selling Price per unit
Breakeven Point in dollars = 32,000 * $75
Breakeven Point in dollars = $2,400,000

Sales Revenue = Unit Sales * Selling Price
Sales Revenue = 60,000 * $75
Sales Revenue = $4,500,000

Margin of Safety in dollars = Sales Revenue - Breakeven Point in dollars
Margin of Safety in dollars = $4,500,000 - $2,400,000
Margin of Safety in dollars = $2,100,000

Answer d.

Selling Price = $60
Variable Cost per unit = $50
Fixed Costs = $800,000

Contribution Margin per unit = Selling Price - Variable Cost per unit
Contribution Margin per unit = $60 - $50
Contribution Margin per unit = $10

Breakeven Point in unit = Fixed Costs / Contribution Margin per unit
Breakeven Point in unit = $800,000 / $10
Breakeven Point in unit = 80,000

If Ionic Charge set up its selling price at $60 then it has to manufacture and sell 80,000 units to achieve breakeven.