The Wiltmore Co. would like to add a new product to complete their lineup. They want to know how many units they must sell to limit their potential loss to their initial investment. What is this quantity if
Their ﬁxed costs are $12,000, the depreciation expense is $2,500, and the contribution margin is
$1)30? (Round to whole units)
A) 9,231 units
B) 9,903 units
C) 10,002 units
D) 10,629 units
E) 11,154 units

Question

Quizplus · Accepted Answer

The correct answer is A.The contribution margin is $1.30, which means that for every unit sold, the company will make $1.30 in profit. The fixed costs are $12,000, and the depreciation expense is $2,500. This means that the company will need to sell enough units to cover these costs before they start making a profit.To calculate the number of units that the company needs to sell, we can use the following formula:```Number of units = Fixed costs + Depreciation expense / Contribution margin```Plugging in the numbers, we get:```Number of units = $12,000 + $2,500 / $1.30 = 9,230.77```Rounding up to the nearest whole unit, we get 9,231 units. This means that the company will need to sell at least 9,231 units to limit their potential loss to their initial investment.