Sarah Smith,a sole proprietor,has the following projected figures for next year: $\begin{array}{lr}
\text { Selling price per unit } & \$ 150.00 \
\text { Contribution margin per unit } & \$ 45.00 \
\text { Total fixed costs } & \$ 630,000
\end{array}$
What selling price per unit is needed to obtain a before-tax profit of $270,000 at a volume of 4,000 units?

Question

Sarah Smith,a sole proprietor,has the following projected figures for next year: $\begin{array}{lr}
\text { Selling price per unit } & \$ 150.00 \
\text { Contribution margin per unit } & \$ 45.00 \
\text { Total fixed costs } & \$ 630,000
\end{array}$
 What selling price per unit is needed to obtain a before-tax profit of $270,000 at a volume of 4,000 units?

Quizplus · Accepted Answer

To achieve a before-tax profit of $270,000 at 4,000 units, the total contribution margin needed is $630,000 (fixed costs) + $270,000 (desired profit) = $900,000. The contribution margin per unit required is $900,000 / 4,000 units = $225. Adding this to the variable cost per unit ($150 - $45 = $105), the selling price per unit should be $225 + $105 = $330.

Sarah Smith,a Sole Proprietor,has the Following Projected Figures for Next