Elements Utensils has the following cost estimates: variable cost per unit is $9, total fixed costs are $58 000 and the projected sales price is $13 each. The new accountant suggests that fixed costs can be reduced by $8000. If so, how many units must be sold to produce a profit of $130 000?

Question

Quizplus · Accepted Answer

To find the number of units needed to achieve a profit of $130,000, first calculate the contribution margin per unit: $13 (sales price) - $9 (variable cost) = $4. Adjust the fixed costs: $58,000 - $8,000 = $50,000. The total profit needed is $130,000 + $50,000 (adjusted fixed costs) = $180,000. Divide the total profit needed by the contribution margin: $180,000 / $4 = 45,000 units.

Elements Utensils Has the Following Cost Estimates: Variable Cost Per