A product sells for $20 per unit and has a contribution margin ratio of 40%.Fixed expenses total $240,000 annually.How many units of the product must be sold to yield an operating income of $60,000?
A) 37,500 units.
B) 40,000 units.
C) 65,000 units.
D) 30,000 units.

Question

Quizplus · Accepted Answer

The contribution margin per unit is $20 * 40% = $8. To achieve an operating income of $60,000, the total contribution margin must cover both the fixed expenses and the desired operating income: $240,000 + $60,000 = $300,000. Therefore, the number of units required is $300,000 / $8 = 37,500 units.

A Product Sells for $20 Per Unit and Has a Contribution