If the fixed costs are $12,000 and the variable cost per unit is $20, how many u

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Question: If the fixed costs are $12,000 and the variable cost per unit is $20, how many units must be sold to achieve a target profit of $8,000 if the selling price is $50?

Options:

400 units
500 units
600 units
700 units

Correct Answer: 500 units

Solution:

Required sales = (Fixed costs + Target profit) / Contribution margin per unit = ($12,000 + $8,000) / ($50 - $20) = $20,000 / $30 = 667 units.

If the fixed costs are $12,000 and the variable cost per unit is $20, how many u

Practice Questions

If the fixed costs are $12,000 and the variable cost per unit is $20, how many units must be sold to achieve a target profit of $8,000 if the selling price is $50?

400 units
500 units
600 units
700 units

Questions & Step-by-Step Solutions

If the fixed costs are $12,000 and the variable cost per unit is $20, how many units must be sold to achieve a target profit of $8,000 if the selling price is $50?

Step 1: Identify the fixed costs, which are $12,000.
Step 2: Identify the variable cost per unit, which is $20.
Step 3: Identify the selling price per unit, which is $50.
Step 4: Calculate the contribution margin per unit by subtracting the variable cost from the selling price: $50 - $20 = $30.
Step 5: Identify the target profit, which is $8,000.
Step 6: Add the fixed costs and the target profit together: $12,000 + $8,000 = $20,000.
Step 7: Divide the total from Step 6 by the contribution margin per unit from Step 4: $20,000 / $30 = 667 units.
Step 8: Conclude that 667 units must be sold to achieve the target profit.

Break-even analysis – Understanding how fixed and variable costs contribute to determining the number of units needed to achieve a specific profit.
Contribution margin – Calculating the contribution margin per unit to assess how much each unit sold contributes to covering fixed costs and generating profit.
Profit target calculation – Incorporating target profit into the calculation to determine the required sales volume.

If the fixed costs are $12,000 and the variable cost per unit is $20, how many u

What’s inside this PDF?

If the fixed costs are $12,000 and the variable cost per unit is $20, how many u

Practice Questions

Questions & Step-by-Step Solutions

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