Question

n Corporation has a single product whose selling price is $120 per unit and whose variable expense is $80 per unit. The company’s monthly fixed expense is $50,000. Required: 1. Calculate the unit sales needed to attain a target profit of $10,000.

Answer 1

Answer:

Explanation:

targeted profit can be achieved after covering total cost including fix cost

total cost = variable cost + fix cost

break even = total cost = total revenue

first we need to cover variable cost

Selling price                             =  120

Varaible cost                            =  -80

contribution margin                =   40

Now we need to cover fix cost

break even =  fix cost/ contribution margin    

break even =  50000/40

break even =  1250

now we need extra units to cover the targeted profit

 targeted units =  10000/40  

 targeted units =  250

total units that should be sold for targted profit of $10000 = (250+1250) = 1500

or  

we can solve through this method

targeted units = (fix cost+targeted profit) / CM per unit

targeted units = (50000+10000)/40

targeted units = 60000/40

targeted units = 1500