Acme Company provided the following data:
$\begin{array}{lr}
\text { Selling price per unit } & \$ 80 \
\text { Variable cost per unit } & \$ 60 \
\text { Total fixed costs } & \$ 400,000
\end{array}$
-Refer to the Figure.How many units must Acme sell to earn a profit of $40,000?
A)2,000
B)8,500
C)20,000
D)22,000

Question

Acme Company provided the following data:
 $\begin{array}{lr}
\text { Selling price per unit } & \$ 80 \
\text { Variable cost per unit } & \$ 60 \
\text { Total fixed costs } & \$ 400,000
\end{array}$
-Refer to the Figure.How many units must Acme sell to earn a profit of $40,000?
A)2,000
B)8,500
C)20,000
D)22,000

Quizplus · Accepted Answer

To find the number of units needed to earn a profit of $40,000, we first calculate the contribution margin per unit, which is the selling price per unit minus the variable cost per unit: $80 - $60 = $20. Then, we add the desired profit ($40,000) to the total fixed costs ($400,000) to find the total amount needed: $400,000 + $40,000 = $440,000. Finally, we divide this total by the contribution margin per unit to find the number of units: $440,000 / $20 = 22,000 units.

Acme Company Provided the Following Data -Refer to the Figure