Question

A company's selling price is $90 per unit, variable cost per unit is $28 and total fixed expenses are $320,000. The number of unit sales needed to earn a target profit of $200,800 is Blank______.

Multiple choice question.

8,400


5,162


18,600


5,787

Answer 1

To calculate the number of unit sales needed to earn a target profit, we can use the following formula:

\[
\text{Required Sales (units)} = \frac{\text{Fixed Expenses} + \text{Target Profit}}{\text{Selling Price per Unit} - \text{Variable Cost per Unit}}
\]

Given:
- Selling price per unit = $90
- Variable cost per unit = $28
- Total fixed expenses = $320,000
- Target profit = $200,800

First, calculate the contribution margin per unit:

\[
\text{Contribution Margin per Unit} = \text{Selling Price per Unit} - \text{Variable Cost per Unit} = 90 - 28 = 62
\]

Now, insert the known values into the formula:

\[
\text{Required Sales (units)} = \frac{320,000 + 200,800}{62} = \frac{520,800}{62} \approx 8,387.1
\]

Since the number of units must be a whole number, we round up if necessary. The closest option provided is:

**8,400**

So the correct answer is **8,400**.