In a case study, a company has a contribution margin of $40 per unit and fixed costs of $200,000. How many units must be sold to achieve a target profit of $100,000?

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5,000 units
7,500 units
10,000 units
12,500 units

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Q: In a case study, a company has a contribution margin of $40 per unit and fixed costs of $200,000. How many units must be sold to achieve a target profit of $100,000?

Solution: Required units = (Fixed Costs + Target Profit) / Contribution Margin = ($200,000 + $100,000) / $40 = 7,500 units.

Steps: 6

Step 1: Identify the contribution margin per unit, which is $40.
Step 2: Identify the fixed costs, which are $200,000.
Step 3: Identify the target profit, which is $100,000.
Step 4: Add the fixed costs and the target profit together: $200,000 + $100,000 = $300,000.
Step 5: Divide the total from Step 4 by the contribution margin: $300,000 / $40 = 7,500.
Step 6: The result from Step 5 is the number of units that must be sold to achieve the target profit, which is 7,500 units.

In a case study, a company has a contribution margin of $40 per unit and fixed costs of $200,000. How many units must be sold to achieve a target profit of $100,000?

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