A company has fixed costs of $20,000 and a contribution margin of $10 per unit.

A company has fixed costs of $20,000 and a contribution margin of $10 per unit. How many units must be sold to achieve a profit of $10,000?

A company has fixed costs of $20,000 and a contribution margin of $10 per unit. How many units must be sold to achieve a profit of $10,000?

Step 1: Identify the fixed costs, which are $20,000.
Step 2: Identify the target profit, which is $10,000.
Step 3: Identify the contribution margin per unit, which is $10.
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: $30,000 / $10 = 3,000.
Step 6: The result from Step 5 tells you the number of units that must be sold to achieve the target profit, which is 3,000 units.

Break-even Analysis – This concept involves calculating the number of units that must be sold to cover fixed costs and achieve a desired profit.
Contribution Margin – The contribution margin is the amount each unit contributes to covering fixed costs and generating profit.