Question - Franklin Company produces a product that has a variable cost of $25 per unit and a sales price of $55 per unit. The company's annual fixed costs total $790,000. It had net income of $350,000 in the previous year. In an effort to increase the company's market share, management is considering lowering the selling price to $49 per unit.
Required
1. If Franklin desires to maintain net income of $350,000 how many additional units must it sell to justify the price decline?
2. Assume that in addition to lowering its selling price to $49, Franklin also desires to increase its net income by $84,000. Determine the number of units the company must sell to earn the desired income.