What formula calculates the number of units needed to earn a desired profit?
A) (fixed costs + variable costs)/sales
B) (fixed costs + desired profit)/sales
C) (fixed costs + desired profit)/contribution margin per unit
D) (fixed costs + variable costs)/contribution margin per unit

Question

Quizplus · Accepted Answer

The formula to calculate the number of units needed to earn a desired profit is (fixed costs + desired profit)/contribution margin per unit. This takes into account the fixed costs, the desired profit, and the contribution margin per unit, which is the amount left over after subtracting variable costs from the sales price. This formula allows businesses to determine the sales volume necessary to achieve a desired profit.

What Formula Calculates the Number of Units Needed to Earn