How many units would have to be sold to yield a target operating income of $23,000,assuming variable costs are $25 per unit,total fixed costs are $2,000,and the unit selling price is $30?
A) 4,800 units
B) 4,400 units
C) 5,000 units
D) 5,200 units

Question

Quizplus · Accepted Answer

First, we need to calculate the contribution margin per unit:

Contribution margin per unit = Selling price per unit - Variable cost per unit 
Contribution margin per unit = $30 - $25 = $5

Next, we use the contribution margin per unit to calculate the break-even point in units:

Break-even point (in units) = Total fixed costs / Contribution margin per unit 
Break-even point (in units) = $2,000 / $5 = 400 units

To calculate the units needed to achieve a target operating income of $23,000, we use the following formula:

Units sold = (Fixed costs + Target operating income) / Contribution margin per unit 
Units sold = ($2,000 + $23,000) / $5 = 5,000 units

Therefore, the answer is C) 5,000 units.

How Many Units Would Have to Be Sold to Yield