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If the contribution margin per unit is $40 and fixed costs are $20,000, how many
If the contribution margin per unit is $40 and fixed costs are $20,000, how many units need to be sold to achieve a target profit of $10,000?
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If the contribution margin per unit is $40 and fixed costs are $20,000, how many units need to be sold to achieve a target profit of $10,000?
750 units
500 units
600 units
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Required units = (Fixed Costs + Target Profit) / Contribution Margin per Unit = ($20,000 + $10,000) / $40 = 750 units.
Questions & Step-by-step Solutions
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Q
Q: If the contribution margin per unit is $40 and fixed costs are $20,000, how many units need to be sold to achieve a target profit of $10,000?
Solution:
Required units = (Fixed Costs + Target Profit) / Contribution Margin per Unit = ($20,000 + $10,000) / $40 = 750 units.
Steps: 6
Show Steps
Step 1: Identify the contribution margin per unit, which is given as $40.
Step 2: Identify the fixed costs, which are given as $20,000.
Step 3: Identify the target profit, which is given as $10,000.
Step 4: Add the fixed costs and the target profit together: $20,000 + $10,000 = $30,000.
Step 5: Divide the total from Step 4 by the contribution margin per unit: $30,000 / $40.
Step 6: Calculate the result from Step 5, which equals 750 units.
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