Exhibit 6-1
Larimer Company has monthly fixed costs totaling $90,000 and variable costs of $5 per unit.Each unit of product is sold for $20.
-Refer to Exhibit 6-1.How many units must be sold to earn a monthly profit of $135,000?
A)6,750
B)9,000
C)15,000
D)6,000
E)None of the answer choices is correct.

Question

Quizplus · Accepted Answer

To earn a monthly profit of $135,000, we need to find the total revenue required first which can be calculated as:

Total Revenue = Total Cost + Desired Profit
Total Cost = Fixed Cost + Variable Cost

Let's substitute the given values in the above formula:

Total Cost = $90,000 + $5Q
Desired Profit = $135,000
Selling Price per unit = $20

Total Revenue = $90,000 + $5Q + $135,000
Total Revenue = $5Q + $225,000

Now, set the Total Revenue equal to the Total Cost and solve for Q:

$5Q + $225,000 = $20Q + $90,000
$15Q = $135,000
Q = 9,000

Therefore, 9,000 units must be sold to earn a monthly profit of $135,000. The answer is (C).

Exhibit 6-1 Larimer Company Has Monthly Fixed Costs Totaling $90,000 and Variable