Assume the following information: $\begin{array} { l }
\text { Selling price per unit}&\$180\
\text { Contribution margin ratio}&\$48\%\
\text {Total fixed costs }&\$270,000\
\end{array}$

How many units must be sold to generate a before-tax profit of $54,000?
A)4,000 units
B)2,750 units
C)3,570 units
D)3,750 units

Question

Assume the following information: $\begin{array} { l  }
 \text { Selling price per unit}&\$180\
 \text { Contribution margin ratio}&\$48\%\
 \text {Total fixed costs }&\$270,000\
\end{array}$

How many units must be sold to generate a before-tax profit of $54,000?
A)4,000 units
B)2,750 units
C)3,570 units
D)3,750 units

Quizplus · Accepted Answer

To find the number of units needed to generate a specific profit, we use the formula: $$ \text{Units} = \frac{\text{Total Fixed Costs} + \text{Desired Profit}}{\text{Contribution Margin per Unit}} $$ First, we find the contribution margin per unit: $$ \text{Contribution Margin per Unit} = \text{Selling Price per Unit} \times \text{Contribution Margin Ratio} = \$180 \times 0.48 = \$86.4 $$ Then, we calculate the units needed for a \$54,000 profit: $$ \text{Units} = \frac{\$270,000 + \$54,000}{\$86.4} = \frac{\$324,000}{\$86.4} = 3,750 $$

Assume the Following Information How Many Units Must Be Sold to Generate a Before-Tax