Build & Build Company sells its product for $6 a unit. Next year, fixed expenses

Question

Build & Build Company sells its product for $6 a unit. Next year, fixed expenses are expected to be $200,000 and variable expenses are estimated at $4 a unit. How many units must the Company sell to generate net operating income of $40,000?
Question options:
50,000 units
60,000 units
100,000 units
120,000 units Build & Build Company sells its product for $6 a unit. Next year, fixed expenses are expected to be $200,000 and variable expenses are estimated at $4 a unit. How many units must the Company sell to generate net operating income of $40,000?
Question options:
50,000 units
60,000 units
100,000 units
120,000 units Build & Build Company sells its product for $6 a unit. Next year, fixed expenses are expected to be $200,000 and variable expenses are estimated at $4 a unit. How many units must the Company sell to generate net operating income of $40,000?
Question options:
50,000 units
60,000 units
100,000 units
120,000 units

Explanation / Answer

Contribution margin per unit=Sales-Variable expenses

=(6-4)=$2 per unit

Target Contribution margin=Fixed expense+Target net operating income

=(200,000+40000)=$240,000

Hence units to be sold=$240,000/2

=120,000 units.

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