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

Question

Quizplus · Accepted Answer

To calculate the break-even point in units, we use the formula: Break-even point in units = Fixed Costs / (Selling Price per Unit - Variable Cost per Unit). To achieve a specific operating income, we adjust the formula to: Required Sales in Units = (Fixed Costs + Desired Operating Income) / (Selling Price per Unit - Variable Cost per Unit). Plugging in the given values: Required Sales in Units = ($1,200,000 + $200,000) / ($240 - $110) = $1,400,000 / $130 = 10,769 units.

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