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16 September, 16:29

A company provided the following dа ta:Selling price per unit $60Variable cost per unit 40Total fixed costs 400,000How many units must be sold to earn a profit of $40,000?

a. 2,000b. 20,000c. 22,000d. 8,500e. 23,333

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  1. 16 September, 16:55
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    Option (C) is correct.

    Explanation:

    Sale - Variable cost = Contribution Margin

    Contribution Margin - Fixed cost = Profit

    (Selling Price - Variable cost) * No of units sold = Target profit + Fixed costs

    ($60 - $40) * No of units sold = $40,000 + $400,000

    ($20) * No of units sold = $440,000

    No. of units sold = 22,000 units

    In order to earn a profit of $40,000, the company must sell 22,000 units.
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