To reach a target income of $20,000, a firm with fixed costs of $10,000 and a per-unit contribution margin of $5 must sell:

Question

Quizplus · Accepted Answer

To reach a target income of $20,000, we need to add the fixed costs (FC) to the desired income (DI), and then divide the sum by the contribution margin per unit (CM).

DI+FC = (units x CM)
$20,000 + $10,000 = (units x $5)
$30,000 = (units x $5)
6,000 units = units

Therefore, the firm must sell 6,000 units to reach the target income of $20,000.

To Reach a Target Income of $20,000, a Firm with Fixed