A firm with $49,000 in fixed costs breaks even on unit sales of 7,000, how many units must the firm sell to earn $30,000 in operating profits?
A) 30,000 units
B) 11,286 units
C) 15,824 units
D) There is not enough information to determine the unit sales required.

Question

Quizplus · Accepted Answer

To find the number of units needed to earn $30,000 in operating profits, we first determine the contribution margin per unit. At break-even, total contribution margin equals fixed costs, so $49,000 / 7,000 units = $7 per unit. To earn $30,000 in profit, the firm needs $49,000 (fixed costs) + $30,000 (desired profit) = $79,000 in total contribution margin. Dividing $79,000 by the contribution margin per unit ($7) gives 11,286 units.

A Firm with $49,000 in Fixed Costs Breaks Even on Unit