How many units would have to be sold to yield a target operating income of $26,000, assuming variable costs are $27 per unit, total fixed costs are $2,000, and the unit selling price is $32?

Question

Reginald Rush

Business

22 August, 09:18

How many units would have to be sold to yield a target operating income of $26,000, assuming variable costs are $27 per unit, total fixed costs are $2,000, and the unit selling price is $32?

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Answers (1)

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Alicia Garrison · Answer 1

The number of units must be sold to yield a target operating income of $26,000: 5,600 units

Explanation:

Contribution margin per unit = Sales price - Variable cost per unit = $32-$27=$5

The number of units must be sold to meet the target income figure are calculated by using following formula:

The number of units must be sold = (Total fixed cost + Targeted income) / Contribution margin per unit = ($2,000 + $26,000) / $5 = 5,600 units