Product G sells for $25 per unit and has a contribution margin rate of 20 percent. Fixed expenses total $120 000 annually. How many units of Product G must be sold to yield a profit of $60 000?

Question

Quizplus · Accepted Answer

To calculate the breakeven point, we can use the formula:
Breakeven point (in units) = Fixed expenses / Contribution margin per unit
Contribution margin percentage is 20%, which means that the contribution margin per unit is $25 x 20% = $5.

Breakeven point (in units) = $120 000 / $5 = 24 000

To calculate the profit after selling a certain number of units, we can use the following formula:
Profit = (Unit contribution margin x Units sold) - Fixed expenses

We can rearrange this formula to solve for the number of units:
Units sold = (Fixed expenses + Profit) / Unit contribution margin

Plug in the given numbers:
Units sold = ($120 000 + $60 000) / $5 = 36 000

Therefore, 36 000 units of Product G must be sold to yield a profit of $60 000.

Product G Sells for $25 Per Unit and Has a Contribution