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?
Practice Questions
1 question
Q1
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
Required contribution margin = Fixed costs + Desired profit = $4,000 + $10,000 = $14,000. Number of units = $14,000 / $25 = 560 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 $4,000, how much contribution margin is needed if the contribution margin per unit is $25?
Solution: Required contribution margin = Fixed costs + Desired profit = $4,000 + $10,000 = $14,000. Number of units = $14,000 / $25 = 560 units.
Steps: 5
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.
