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20 April, 02:01

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

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  1. 20 April, 02:08
    0
    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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