Question

of $3.00 per unit. The variable cost to manufacture is $2.00 per unit. The monthly fixed costs are $8000. Its current sales are 29,000 units per month. If the company wants to increase its operating income by 20%, how many additional units must it sell

Answer 1

Answer: 33,200 units

Explanation:

Current operating income = Sales - Variable costs - fixed costs

= (29,000 * 3) - (29,000 * 2) - 8,000

= $21,000

An increase of 20% would be:

= 21,000 * 1.20

= $25,200

The number of units that must be sold is:

= (Fixed costs + Required profit) / Contribution margin

Contribution margin = Selling price - Variable cost

= 3 - 2

= $1

Number of units to be sold is:

= (8,000 + 25,200) / 1

= 33,200 units