Cost Volume Profit

Marvel Company had $250,000 of net income in 2020 when the selling price per unit was $150, the variable costs per unit were $100, and the fixed costs were $550,000. Management expects per unit data and total fixed costs to remain the same in 2021. The president of Marvel Company is under pressure from stockholders to increase net income by $50,000 in 2021.

Instructions

(a) Compute the number of units sold in 2020.

(b)Compute the number of units that would have to be sold in 2021 to reach thestockholders' desired profit level.

(c)Assume that Marvel Company sells the same number of units in 2021 as it did in 2020.What would the selling price have to be in order to reach the stockholders' desiredprofit level?

(d)Do you agree that Cost-volume-profit (CVP) analysis is based entirely on unit costs? Explain.