Final answer:
The student's question involves calculating the target quantity of units needed to reach a desired operating income using the contribution margin, which is the selling price minus variable cost per unit. Fixed and desired operating income are divided by the contribution margin to find the target quantity.
Step-by-step explanation:
The calculation provided by the student pertains to determining the target quantity of units required to achieve a specified level of operating income given a known contribution margin. The contribution margin is calculated as the distinct difference between the selling price and the variable cost per unit. This margin is significant in covering fixed costs and achieving profitability. Specifically, a contribution margin of $400 is calculated from a selling price of $640 minus a variable cost of $240. To reach the target operating income, the fixed costs and desired operating income are divided by the contribution margin. In this case, ($4,800 in fixed costs + $10,800 in target operating income) divided by the $400 contribution margin results in a target quantity of 39 units to achieve the goal.
In a broader context, understanding the role of variable costs, contribution margins, and target quantities is crucial in business decision-making, particularly in breakeven analysis and profit planning.