If fixed costs are $1,500,000, the unit selling price is $250, and the unit variable costs are $130, what is the amount of sales required to realize an operating income of $200,000?
A) 14,166 units
B) 12,500 units
C) 16,000 units
D) 11,538 units

Question

Quizplus · Accepted Answer

To achieve an operating income of $200,000, the company needs to generate sales revenue that covers both fixed costs and variable costs, and provides the desired operating income.Sales revenue = Fixed costs + Variable costs + Operating incomeSales revenue = $1,500,000 + ($130 x units sold) + $200,000Sales revenue = $1,700,000 + ($130 x units sold)To find the number of units sold, we can rearrange the equation:Units sold = (Sales revenue - $1,700,000) / $130Units sold = ($1,700,000 + $200,000 - $1,700,000) / $130Units sold = $200,000 / $130Units sold = 14,166.67Therefore, the company needs to sell approximately 14,166 units to achieve an operating income of $200,000.

If Fixed Costs Are $1,500,000, the Unit Selling Price Is