Answer:
Option B: 400 Units of chairs must be sold to earn a target operating income of $60,000
Explanation:
Number of Units to be sold to earn a Target Operating Income of $60,000
= (Target Operating Income + Total Fixed Expenses) ÷ Contribution Per Unit
Where: Contribution per unit = Selling Price per unit - Variable costs per unit
Selling Price per Chair $400
Variable Cost per Chair $(150)
Contribution per Chair $250
Number of Units to be sold to earn a Target Operating Income of $60,000
= ($40,000 + 60,000) ÷ 250
= 400 Units of Chairs
Income Statement of Workshop
Sales Revenue ($400 ×400 Units) $160,000
Less: Variable Costs ($150 × 400 Units) $(60,000)
Contribution $100,000
Less: Fixed Expenses $(40,000)
Target Operating Profit $60,000
