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shtirl [24]
3 years ago
11

Phan Company has not reported a profit in five years. This year the company would like to narrow its loss to $7,500. Assuming it

s selling price is $36.50 per unit and its variable costs per unit are $24, how many units must be sold to achieve its target given that total fixed costs are $60,000? Multiple Choice
a. 2,188
b. 1.439
c. 4,200
d. 1800
Business
1 answer:
alex41 [277]3 years ago
3 0

Answer:

c. 4,200 Units

Explanation:

The computation of units to be sold is shown below:-

For computing the units to be sold first we need to find out the Contribution Margin Per Unit and  Required Contribution Margin which is shown below:-

Contribution Margin Per Unit = Selling Price Per Unit - Variable Cost Per Unit

= $36.50 - $24

= $12.50

Required Contribution Margin = Fixed Cost + Required Profit ÷ Loss

= $60,000 - $7,500

= $52,500

Units to be sold to achieve the target = Required Contribution Margin ÷ Contribution Margin Per Unit

= $52,500 ÷ $12.50

= 4,200 Units

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