Product A sells for $20 per unit and has a contribution margin rate of 40%. Fixed expenses total $120 000 annually. How many units of Product A must be sold to yield a profit of $30 000?

Question

Quizplus · Accepted Answer

To find the required number of units to sell for a specific profit, we need to use the following formula:

Required Sales = (Fixed Expenses + Profit) ÷ Contribution Margin Ratio

Substituting the values, we get:

Required Sales = ($120,000 + $30,000) ÷ 40% = $150,000 ÷ $8 = 18,750 units.

Therefore, the correct answer is B, 18,750 units of Product A must be sold to yield a profit of $30,000.

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