Workshape Company sells office chairs at $400 per unit, incurs variable cost per unit of $150, and has a total fixed expense of $40,000.How many units must be sold to achieve a target operating income of $60,000?

Question

Quizplus · Accepted Answer

Contribution Margin per Unit = Price - Variable Cost per Unit
Contribution margin per unit = ($400 - $150) = $250
Number of Units to Earn Target Income = (Total Fixed Cost + Target Income) / Contribution Margin per Unit
Number of units to earn target income = ($40,000 + $60,000) / $250 = 400 units

Workshape Company Sells Office Chairs at $400 Per Unit, Incurs