The formula for target units is:
A)(Total fixed costs + Target profit)/Contribution margin ratio
B)(Total variable costs + Total fixed costs)/Contribution margin ratio
C)(Total fixed costs + Target profit)/Unit contribution margin
D)(Total variable costs + Total fixed costs)/Unit contribution margin

Question

Quizplus · Accepted Answer

The formula for finding the target units is (Total fixed costs + Target profit)/Unit contribution margin. This formula takes into account both the fixed costs and the desired profit and gives an estimate of the number of units that need to be sold to achieve that profit. Option C is the only formula that matches this format. Option A includes the contribution margin ratio, which is not needed in this formula. Option B only considers variable costs and does not address the target profit. Option D also includes the unit contribution margin, but it is paired with total costs instead of fixed costs and does not address the target profit.

The Formula for Target Units Is