If a company wants to achieve a profit of $10,000 and has fixed costs of $5,000 with a contribution margin of $10 per unit, how many units must be sold?
Practice Questions
1 question
Q1
If a company wants to achieve a profit of $10,000 and has fixed costs of $5,000 with a contribution margin of $10 per unit, how many units must be sold?
1,000
500
1,500
2,000
Required sales = (Fixed costs + Desired profit) / Contribution margin per unit = ($5,000 + $10,000) / $10 = 1,500 units
Questions & Step-by-step Solutions
1 item
Q
Q: If a company wants to achieve a profit of $10,000 and has fixed costs of $5,000 with a contribution margin of $10 per unit, how many units must be sold?
Solution: Required sales = (Fixed costs + Desired profit) / Contribution margin per unit = ($5,000 + $10,000) / $10 = 1,500 units
Steps: 6
Step 1: Identify the fixed costs. In this case, the fixed costs are $5,000.
Step 2: Identify the desired profit. Here, the desired profit is $10,000.
Step 3: Identify the contribution margin per unit. The contribution margin is $10 per unit.
Step 4: Add the fixed costs and the desired profit together. This gives you $5,000 + $10,000 = $15,000.
Step 5: Divide the total from Step 4 by the contribution margin per unit. So, $15,000 / $10 = 1,500 units.
Step 6: The result means the company must sell 1,500 units to achieve the desired profit.
