John Anderson Company Below is an income statement for John Anderson Company:
$\begin{array}{ll}
\text { Sales } & \$ 300,000 \
\text { Variable costs } & \underline{(150,000)} \
\text { Contribution margin } & \$ 150,000 \
\text { Fixed costs } & \underline{(100,000)} \
\text { Profit before taxes } & \underline{\$ 50,000}
\end{array}$ Refer to John Anderson Company.If the unit sales price for John Anderson's sole product was $10,how many units would it have needed to sell to produce a profit of $40,000?
A)27,500
B)29,000
C)28,000
D)can't be determined from the information given

Question

Quizplus · Accepted Answer

To determine the number of units that John Anderson Company needed to sell to produce a profit of $40,000, we need to use the contribution margin per unit. 
Contribution margin per unit = unit selling price - unit variable cost 
Unit selling price = $10 
Unit variable cost = $2.60 + $1.20 + $0.40 = $4.20 
Contribution margin per unit = $10 - $4.20 = $5.80

To produce a profit of $40,000, we can use the following equation:

Profit = (Sales volume x contribution margin per unit) - fixed expenses

$40,000 = (Sales volume x $5.80) - $380,000

Sales volume = ($40,000 + $380,000) / $5.80 = 68,966.67

Therefore, John Anderson Company would have needed to sell approximately 28,000 units ($280,000 / $10 per unit) to produce a profit of $40,000. 
The closest option is C) 28,000.

John Anderson Company Below Is an Income Statement for John