Problem 1. Gold Eagle Company incurs annual fixed costs of $80,000. Variable costs are $6.00 per unit, and the sales price is $10 per unit. Gold Eagle desires to earn an annual profit of $40,000.
Required: Use the contribution margin ratio approach to determine the sales volume in dollars needed to earn the desired profit.
Problem 2. Lee Valley Company produces a product that sells for $80 per unit and has variable costs of $50 per unit. Bristol's annual fixed costs are $240,000, and the company wishes to earn a profit of $60,000.
Required: Use the equation method to determine the sales volume in units and dollars required to earn the desired profit.