Question

Frank Corporation manufactures a single product that has a selling price of $30.00 per unit. Fixed expenses total $36,000 per year, and the company must sell 4,000 units to break even. If the company has a target profit of $18,000, sales in units must be:

Answer 1

Answer:

Target unit sales= 6,000 units

Explanation:

Contributing margin is defined as the sales price less the variable cost per unit.

The breakeven is also defined as the point where cost incurred is equal to the revenue gained.

The formula is given by

Breakeven= Fixed cost/Contributing margin

4,000= 36,000/ contributing margin

Contributing margin= 36,000/4000

Contributing margin= $9

Also

Target unit sales = (profit target+ fixed cost)/ contributing margin

Target unit sales= (18,000+ 36,000)/9

Target unit sales= 6,000 units