If a company wants to achieve a profit of $10,000 and has fixed costs of $4,000,

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Question: If a company wants to achieve a profit of $10,000 and has fixed costs of $4,000, how much contribution margin is needed if the contribution margin per unit is $25?

Options:

$400
$600
$800
$1,000

Correct Answer: $1,000

Solution:

Required contribution margin = Fixed costs + Desired profit = $4,000 + $10,000 = $14,000. Number of units = $14,000 / $25 = 560 units.

If a company wants to achieve a profit of $10,000 and has fixed costs of $4,000,

Practice Questions

If a company wants to achieve a profit of $10,000 and has fixed costs of $4,000, how much contribution margin is needed if the contribution margin per unit is $25?

$400
$600
$800
$1,000

Questions & Step-by-Step Solutions

If a company wants to achieve a profit of $10,000 and has fixed costs of $4,000, how much contribution margin is needed if the contribution margin per unit is $25?

Step 1: Identify the fixed costs of the company, which is $4,000.
Step 2: Identify the desired profit, which is $10,000.
Step 3: Calculate the total contribution margin needed by adding fixed costs and desired profit: $4,000 + $10,000 = $14,000.
Step 4: Identify the contribution margin per unit, which is $25.
Step 5: Calculate the number of units needed to achieve the required contribution margin by dividing the total contribution margin by the contribution margin per unit: $14,000 / $25 = 560 units.

Contribution Margin – The contribution margin is the amount per unit that contributes to covering fixed costs and generating profit.
Fixed Costs – Fixed costs are expenses that do not change with the level of production or sales.
Profit Calculation – Profit is calculated by subtracting total costs (fixed and variable) from total revenue.

If a company wants to achieve a profit of $10,000 and has fixed costs of $4,000,

What’s inside this PDF?

If a company wants to achieve a profit of $10,000 and has fixed costs of $4,000,

Practice Questions

Questions & Step-by-Step Solutions

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