Kuldip's factory manufactures toys that sell for $29.95 each. The variable cost per toy is $11, and the total fixed costs for the month are $45,000. What would unit sales have to be to attain a net income over $12,000?

Question

Quizplus · Accepted Answer

To find the unit sales needed to attain a net income over $12,000, we first calculate the contribution margin per unit, which is the selling price per unit minus the variable cost per unit: $29.95 - $11 = $18.95. Next, we calculate the total contribution needed to cover the fixed costs and achieve a net income of $12,000: $45,000 (fixed costs) + $12,000 (desired net income) = $57,000. Finally, we divide the total contribution needed by the contribution margin per unit to find the unit sales: $57,000 / $18.95 ≈ 3,008 units.

Kuldip's Factory Manufactures Toys That Sell for $29