Product A sells for $100 per unit and has a contribution margin rate of 25%. Fixed expenses total $80 000 annually. How many units of Product A must be sold to yield a profit of $40 000?

Question

Quizplus · Accepted Answer

To find the number of units needed to yield a profit of $40,000, we first calculate the contribution margin per unit, which is 25% of $100, equaling $25 per unit. The total amount needed to cover both the fixed expenses and the desired profit is $80,000 + $40,000 = $120,000. Dividing this total by the contribution margin per unit ($120,000 / $25) gives us 4,800 units.

Product a Sells for $100 Per Unit and Has a Contribution