Kelsey has been making soy candles for friends and family for many years. Recently she debated making an official website to sell her candles to the general public. Her variable cost is $4.20 per unit, and she would sell each candle for $10.00. Her fixed costs will be $418.00 per month. How many units would she need to sell per year to completely replace her current annual salary of $36,450? Round your final answer to the nearest whole unit.

Question

Quizplus · Accepted Answer

This question requires familiarity with calculating various components of operating income using the following formula: Sales - Variable Costs - Fixed Costs = Operating Income. In this question, the operating income is not given, but the annual operating income would have to be at least equal to her annual salary of $36,450. First, annualize her costs. Fixed Costs = $418.00 × 12 = $5,016.00. Now, solve for her sales: Sales - Variable Costs - Fixed Costs = Operating Income. ($10.00 - $4.20)X - $5,016.00 = $36,450. $5.80X = $41,466. To calculate the units, she would need to sell: X = $41,466/$5.80 = 7,149.31 or 7,150 units (Choice C).

Kelsey Has Been Making Soy Candles for Friends and Family