A company desires to sell a sufficient quantity of products to earn a profit of $180,000. If the unit sales price is $20, unit variable cost is $12, and total fixed costs are $360,000, how many units must be sold to earn net income of $180,000?
A) 101,250 units
B) 67,500 units
C) 54,000 units
D) 40,500 units

Question

Quizplus · Accepted Answer

First, we need to calculate the contribution margin per unit:

Contribution margin per unit = Unit sales price - Unit variable cost
Contribution margin per unit = $20 - $12
Contribution margin per unit = $8

Next, we can use the following formula to calculate the number of units needed to earn a net income of $180,000:

Net income = (Unit sales price - Unit variable cost) x Number of units - Fixed costs

$180,000 = ($20 - $12) x Number of units - $360,000
$180,000 + $360,000 = $8x Number of units
$540,000 = $8x Number of units
Number of units = $540,000 / $8
Number of units = 67,500 units

Therefore, the best choice is B, as 67,500 units must be sold to earn net income of $180,000.

A Company Desires to Sell a Sufficient Quantity of Products