Bingo Inc. sells a single product for $20. Variable costs are $14 per unit and fixed costs total $220,000 at a volume level of 10,000 units. What dollar sales level would Bingo Inc. have to achieve to earn a target net profit of $340,000?
A)$314,286.
B)$485,714.
C)$566,667.
D)$1,866,667.
E)$733,333.

Question

Quizplus · Accepted Answer

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

Sales price - Variable cost per unit = Contribution margin per unit 
$20 - $14 = $6

Next, we can use the following formula to calculate the sales volume needed to achieve the target net profit:

(Sales volume x Contribution margin per unit) - Fixed costs = Target net profit

Plugging in the numbers:

(Sales volume x $6) - $220,000 = $340,000

Simplifying:

(Sales volume x $6) = $560,000

Sales volume = $560,000 / $6 = 93,333 units

Finally, we can calculate the dollar sales level needed to achieve this volume:

93,333 units x $20 per unit = $1,866,660

So, the best choice is (D) $1,866,667.

Bingo Inc Sells a Single Product for $20