LO 3.2Company A wants to earn $5,000 profit in the month of January. If their fixed costs are $10,000 and their product has a per-unit contribution margin of $250, how many units must they sell to reach their target income?

20

40

60

120

The correct answer is 60.

Explanation:

The number of units required to be sold in order to generate given profit can be calculated by dividing the sum of target profit and fixed cost with contribution per unit. The detail calculation is given below.

Contribution per unit = 250 dollars

Profit required = 5,000

Fixed cost = 10,000

Units required to be sold = (10000 + 5000) / 250

= 60 units