Question

Sunland Company wants to sell a sufficient quantity of products to earn a profit of $300000. If the unit sales price is $12, unit variable cost is $8, and total fixed costs are $200000, how many units must be sold to earn income of $300000

Answer 1

Answer:

$125,000

Explanation:

Data provided as below:-

Profit = $300,000

Total fixed cost = $200,000

Sales price = $12

Unit variable cost = $8

The computation of income is shown below:-

Units must be sold to earn net income of $300,000 = Profit + Total fixed costs  ÷ Sales price - Unit variable cost

= $300,000 + $200,000 ÷ $12 - $8

= $500,000 ÷ $4

= $125,000

So, for computing the net income we simply applied the above formula.

Answer 2

Answer:

125,000 units

Explanation:

Given that,

Target profit = $300,000

Unit sales price = $12

Unit variable cost = $8

Total fixed costs = $200,000

Firstly, we need to find out the contribution margin per unit:

= Unit sales price - Unit variable cost

= $12 - $8

= $4

Now, units required to sold for earning the desired profit is calculated by dividing the sum of desired net income and total fixed costs by the contribution margin per unit. It is calculated as follows:

= (Target net income + Total fixed cost) ÷ Contribution margin per unit

= ($300,000 + $200,000) ÷ $4

= $500,000 ÷ $4

= 125,000 units

Therefore, this company must be sold 125,000 units to earn income of $300,000.