If fixed costs are $1,200,000, the unit selling price is $240, and the unit variable costs are $110, what is the amount of sales in units (rounded to a whole number) required to realize an operating income of $200,000?
A) 9,231 units
B) 12,000 units
C) 10,769 units
D) 5,833 units

Question

Quizplus · Accepted Answer

The formula to calculate the break-even point in units is:
Break-even point (units) = Fixed costs / (Unit selling price - Unit variable costs)

Using this formula, we can calculate the break-even point as:
Break-even point (units) = $1,200,000 / ($240 - $110) = 10,769 units

To calculate the sales in units required to realize an operating income of $200,000, we use the following formula:
Sales (units) = (Fixed costs + Operating income) / (Unit selling price - Unit variable costs)

Using this formula, we can calculate the sales in units as:
Sales (units) = ($1,200,000 + $200,000) / ($240 - $110) = 9,231 units

Therefore, the answer is C (10,769 units) which is the break-even point in units, plus the additional units required to realize the operating income of $200,000.

If Fixed Costs Are $1,200,000, the Unit Selling Price Is