Sunny Manufacturing sells its product for $40 per unit. Last year, variable costs per unit were $15, and fixed costs were $400,000. How many units must be sold this year to earn a pre-tax profit of $45,000 if variable costs increase by 10%?
A) 27,813
B) 18,936
C) 17,021
D) 19,778

Question

Quizplus · Accepted Answer

First, we need to calculate the contribution margin per unit:
Contribution Margin = Sales Price per unit - Variable Costs per unit
Contribution Margin = $40 - ($15 * 1.10) = $23.50

Next, we need to calculate the number of units that need to be sold to earn a pre-tax profit of $45,000:
($23.50 * X) - $400,000 = $45,000
$23.50 * X = $445,000
X = $445,000 / $23.50
X = 18,936 units (rounded to the nearest whole number)

Therefore, choice B is the best answer.

Sunny Manufacturing Sells Its Product for $40 Per Unit