A manufacturing company is considering producing a new product. The variable cost of the new product is $60 per unit, and the total fixed costs are $75,000 for a month. The company could produce 1500 units per month, and sell the product for $125 each. What sales would result in a net income of $16,000?
A) 1200 units
B) 1250 units
C) 1300 units
D) 1375 units
E) 1400 units

Question

Quizplus · Accepted Answer

To find the sales needed for a net income of $16,000, calculate the total revenue required: Total Revenue = Total Fixed Costs + Total Variable Costs + Desired Net Income. Total Revenue = $75,000 + ($60 * Units) + $16,000. Set this equal to the revenue from selling units at $125 each and solve for units: $125 * Units = $75,000 + $60 * Units + $16,000. Solving gives Units = 1400.

A Manufacturing Company Is Considering Producing a New Product