Mays Company Had $125,000 of Net Income in 2010 When

question 161

Essay

Mays Company had $125,000 of net income in 2010 when the selling price per unit was $100, the variable costs per unit were $60, and the fixed costs were $475,000. Management expects per unit data and total fixed costs to remain the same in 2011. The president of Mays Company is under pressure from stockholders to increase net income by $75,000 in 2011.
Instructions
(a) Compute the number of units sold in 2010.
(b) Compute the number of units that would have to be sold in 2011 to reach the stockholders' desired profit level.
(c) Assume that Mays Company sells the same number of units in 2011 as it did in 2010. What would the selling price have to be in order to reach the stockholders' desired profit level.

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Definitions:

Rational Relationship Test

A standard of review used by courts to evaluate the constitutionality of laws, ensuring that the law has a reasonable relation to a legitimate government purpose.

Economic Regulation

Government-imposed restrictions and controls on economic activities and industries to correct market failures and promote the public interest.

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Publishing false information about someone with knowledge of its falsity or with reckless disregard for the truth, especially in defamation law.

Defamation Cases

Legal disputes that involve harm done to an individual's or entity's reputation through false or misleading statements made to a third party.