Question

Hughes Company manufactures harmonicas which it sells for $ 23 each. Variable costs for each unit are $ 10 and total fixed costs are $ 7 comma 900. How many units must be sold to earn income of $ 2 comma 500​?

Answer 1

Answer:

800 units

Explanation:

The net income earned is the difference between the total sales and the total cost. The total cost is the sum of the fixed and variable cost. The sales and variable cost are dependent on the level of activities or number of units produced and sold.

The difference between the sales and variable cost gives the contribution margin.

In light of the above,

let the number of units to be sold to achieve targeted income be x

Total sales = $23x

Total variable cost = 10x

2,500 = 23x - 10x - 7,900

13x = 7900 + 2500

13x = 10,400

x = 800 units