Question

Reliable manufacturing wants to sell a sufficient quantity of products to earn a profit of $100,000. if the unit sales price is $10, unit variable cost is $8, and total fixed costs are $200,000, how many units must be sold to earn income of $100,000? 100,000 units 1,500,000 units 150,000 units 37,500 units

Answer 1

Answer:

The correct option is 150,000 units

Explanation:

The number of units required to make $100,000 profit is given by the below formula:

number of units =fixed costs+target profit/contribution per unit

fixed costs is $200,000

target profit is $100,000

contribution per unit =sales price-variable cost

                                   =$10-$8

                                   =$2

number of units to make $100,000=$200,000+$100,000/$2

                                                           =$300,000/2

                                                          =150,000 units

In order to make $100,000 profit 150,000 units must be sold

Answer 2

Answer:

 c)150,000 units

Explanation:

The cost profit volume analysis shows the relationship between the level of activity, cost and profit. It can be used to solve this problem

The units to be sold to make an income of $100,000 can be determined as follows:

Units to be sold = (Fixed cost + Income)/Sales minus variable cost

Fixed cost = 200,000, Selling price = 10, variable cost - 8, income - 100,000

Units to be sold =(  200,000 + 100,000)/ (10-8)

                      = 150,000 units