Question

A company is trying to make a decision about the new drones they plan to produce. It has an expected selling price of $400, the variable cost per unit is $225, and estimated fixed costs per month are $52,500. How many drones must be sold to earn a profit of $35,000?

Answer 1

Answer:

= 7,954.5 units

Explanation:

Units to be sold to achieve target profit can be determined using the formula below

Units to be sold to achieve target

= Total fixed costs for the period +Target profit/contribution per unit

Contribution per unit = Selling price - variable cost

Profit to be sold to earn a profit of $35,000 will be determined as follows:

Units to be sold

Contribution per unit = $400 - $225 = 175

= Total fixed costs for the period  + Target profit/contribution per unit

=( 52,500 + 35,000)/175

= 7,954.5 units