A total of 30,000 units were sold last year.The contribution margin per unit was $2,and total fixed expenses were $20,000 for the year.This year,fixed expenses are expected to increase to $26,000,but the contribution margin per unit will remain unchanged at $2.How many units must be sold this year to earn the same operating income as was earned last year?

Question

Quizplus · Accepted Answer

To earn the same operating income as was earned last year, we need to calculate the total contribution margin required to cover the fixed expenses of $26,000 and then divide that by the contribution margin per unit ($2) to find the number of units needed to be sold.

Total contribution margin required = Fixed expenses + Operating income
Operating income = Total contribution margin - Fixed expenses
Operating income last year = Total contribution margin last year - Fixed expenses last year
Operating income last year = ($2 * 30,000) - $20,000 = $40,000

Therefore, the total contribution margin required this year = Fixed expenses this year + Operating income last year
Total contribution margin required this year = $26,000 + $40,000 = $66,000

To calculate the number of units required to achieve this contribution margin, we divide it by the contribution margin per unit.
Number of units required = Total contribution margin required / Contribution margin per unit
Number of units required = $66,000 / $2 = 33,000

Therefore, choice B is the correct answer.

A Total of 30,000 Units Were Sold Last Year