A company has fixed costs of $320,000 and a contribution margin per unit of $15.

Question

A company has fixed costs of $320,000 and a contribution margin per unit of $15. If the firm wants to earn a target $40,000 pretax income, how many units must be sold (rounded to the nearest whole unit)? 24,000. 21,333. 18,666. 2,667. 20,000. Watson Company has monthly fixed costs of $83,000 and a 40% contribution margin ratio. If the company has set a target monthly income of $15,000, what dollar amount of sales must be made to produce the target income? $245,000 $207,500 $37,300 $170,000 $39,200

Explanation / Answer

13.

Target Sales in units= Target Profit + Fixed Cost/ Contribution per unit

                                     =$40,000 +$320,000/15

                                      =$360,000/15

                                      = 24,000 units

14.

Target Sales in $= Target Profit + Fixed Cost/ Contribution Margin Ratio

                                     =$15,000 +$83,000/40%

                                      =$98,000/40%

                                      = $ 245,000

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