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4 July, 16:55

Fantasy Corporation manufactures a single product. The selling price is $125 per unit, and variable costs amount to $81 per unit. The fixed costs are $28,500 per month (round any units to the next highest full unit). How many units must be sold each month to earn a monthly operating income of $50,000

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Answers (2)
  1. 4 July, 18:35
    0
    The correct answer is 1,785 Units.

    Explanation:

    According to the scenario, the given data are as follows:

    Selling price per unit = $125

    Variable cost = $81

    Fixed cost = $28,500

    Target monthly income = $50,000

    So, we can calculate the units to sell to earn monthly target income by using following method:

    Units required = (Profit required + fixed cost) : contribution margin

    Where, Contribution Margin = $125 - $81 = 44

    By putting the value, we get

    = ($ 50,000 + $28,500) : 44

    = 1,785 units
  2. 4 July, 20:49
    0
    Desired sales units = 1,785 units

    Explanation:

    Given:

    Selling price = $125 per unit

    Variable cost = $81 per unit

    Fixed cost = $28,500 per month

    Desired profit = $50,000

    Desired sales units = ?

    Computation of contribution per unit:

    Contribution per unit = Selling price - Variable cost

    Contribution per unit = $125 - $81

    Contribution per unit = $44

    Computation of desired sales units:

    Desired sales units = (Desired profit + Fixed cost) / Contribution per unit

    Desired sales units = ($50,000 + $28,500) / $44

    Desired sales units = 1,784.09091

    Desired sales units = 1,785 units
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