A company incurs $10,000 in fixed costs and has a contribution margin of $25 per unit. How many units must be sold to achieve a target profit of $15,000?

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Q: A company incurs $10,000 in fixed costs and has a contribution margin of $25 per unit. How many units must be sold to achieve a target profit of $15,000?

Solution: Required Sales = (Fixed Costs + Target Profit) / Contribution Margin per Unit = ($10,000 + $15,000) / $25 = $25,000 / $25 = 1,000 units.

Steps: 6

Step 1: Identify the fixed costs. In this case, the fixed costs are $10,000.
Step 2: Identify the target profit. Here, the target profit is $15,000.
Step 3: Identify the contribution margin per unit. The contribution margin is $25 per unit.
Step 4: Add the fixed costs and the target profit together. This gives you $10,000 + $15,000 = $25,000.
Step 5: Divide the total from Step 4 by the contribution margin per unit. So, $25,000 / $25 = 1,000 units.
Step 6: Conclude that the company must sell 1,000 units to achieve the target profit.

A company incurs $10,000 in fixed costs and has a contribution margin of $25 per unit. How many units must be sold to achieve a target profit of $15,000?

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