Junior Bodway, Inc., has provided the following budgeted data: How many units would the company have to sell in order to have a net operating income of $40,000?

Question

Junior Bodway, Inc., has provided the following budgeted data:  How many units would the company have to sell in order to have a net operating income of $40,000?

Quizplus · Accepted Answer

Unit CM = Selling price per unit - Variable expenses per unit
= $50 per unit - $30 per unit = $20 per unit
Unit sales to attain a target profit = (Target profit + Fixed expenses) ÷ Unit CM
= ($40,000 + $180,000) ÷ $20 per unit = $220,000 ÷ $20 per unit = 11,000 units