Question

Assume the following information: Selling price per unit $200 Contribution margin ratio 50% Total fixed costs $275,000 How many units must be sold to generate a profit of $50,000

Answer 1

Answer:

Results are below.

Explanation:

Giving the following information:

Selling price per unit $200

Contribution margin ratio 50%

Total fixed costs $275,000

Desired profit= $50,000

First, we need to calculate the sales required to obtain the desired profit:

Break-even point (dollars)= (fixed costs + desired profit) / contribution margin ratio

Break-even point (dollars)= (275,000 + 50,000) / 0.5

Break-even point (dollars)= $650,000

Now, the number of units:

Number of units= 650,000 / 200= 3,250

Or, you can use the following formula:

Break-even point in units= (fixed costs + desired profit) / contribution margin per unit

Break-even point in units= (275,000 + 50,000) / (0.5*200)

Break-even point in units= 3,250