A product sells for $20 per unit and has a contribution margin ratio of 40 percent.Fixed expenses total $240,000 annually.How many units of the product must be sold to yield a profit of $60,000?

Question

Quizplus · Accepted Answer

Unit CM =Selling price per unit F1F1F1S1F1F1F10 Contribution margin ratio
= $20 per unit F1F1F1S1F1F1F10 40%
= $8 per unit
Unit sales to attain a target profit = (Target profit + Fixed expenses)F1F1F1S1F1F1F10 Unit CM
= ($240,000 + $60,000)F1F1F1S1F1F1F10 $8 per unit
= 37,500 units

A Product Sells for $20 Per Unit and Has a Contribution