Moon Company sells its product for £6 a unit. Next year, fixed expenses are expected to be £200,000 and variable expenses are estimated at £4 a unit. How many units must Moon sell to generate net operating income of £40,000
A)50,000 units
B)60,000 units
C)100,000 units
D)120,000 units

Question

Quizplus · Accepted Answer

To calculate the number of units Moon has to sell to earn £40,000 net income, we can use the following formula:

Net Income = (Unit Selling Price x Quantity Sold) - (Variable Costs per Unit x Quantity Sold) - Fixed Costs

£40,000 = (£6 x Q) - (£4 x Q) - £200,000

£40,000 = £2 x Q - £200,000

£240,000 = £2 x Q

Q = 120,000 units

Therefore, Moon Company must sell 120,000 units to generate a net operating income of £40,000.

The correct answer is D, 120,000 units.

Moon Company Sells Its Product for £6 a Unit