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1 May, 08:44

A company is trying to make a decision about the new drones they plan to produce. It has an expected selling price of $400, the variable cost per unit is $225, and estimated fixed costs per month are $52,500. How many drones must be sold to earn a profit of $35,000?

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  1. 1 May, 10:24
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    = 7,954.5 units

    Explanation:

    Units to be sold to achieve target profit can be determined using the formula below

    Units to be sold to achieve target

    = Total fixed costs for the period + Target profit/contribution per unit

    Contribution per unit = Selling price - variable cost

    Profit to be sold to earn a profit of $35,000 will be determined as follows:

    Units to be sold

    Contribution per unit = $400 - $225 = 175

    = Total fixed costs for the period + Target profit/contribution per unit

    = (52,500 + 35,000) / 175

    = 7,954.5 units
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