If a company has fixed costs of $40,000, a unit selling price of $12, and variable costs of $4 per unit, how many units will it have to sell to make a profit of $20,000?
A)5,000 units
B)2,500 units
C)3,600 units
D)7,500 units

Question

Quizplus · Accepted Answer

To make a profit of $20,000, the company needs to cover both the fixed costs of $40,000 and the desired profit of $20,000, totaling $60,000. The contribution margin per unit is $12 - $4 = $8. Therefore, the company needs to sell $60,000 / $8 = 7,500 units.

If a Company Has Fixed Costs of $40,000, a Unit