Question

A company sells its product for $40 per unit. Variable costs are $12 per unit. Total fixed costs are $50,000. In order to reach the profit goal of $90,000 the company must sell __units of the product.

Answer 1

To reach the profit goal of $90,000, the company must sell 5,000 units of their product. This calculation is based on the given selling price, variable costs per unit, and fixed costs.

Step-by-step explanation:

The subject of the question involves calculating the number of units a company must sell to achieve a specific profit goal. This is a typical problem found in a business course, more specifically within the field of financial accounting or managerial accounting. This type of problem requires understanding of concepts such as variable costs, fixed costs, and unit selling price.

To find the number of units needed to be sold to reach the profit goal of $90,000, we use the following formula:

Profit = (Selling Price per Unit - Variable Cost per Unit) × Number of Units - Fixed Costs

In this case:

$90,000 = ($40 - $12) × Number of Units - $50,000

Solving for the Number of Units gives us:

$90,000 = $28 × Number of Units - $50,000
Number of Units = ($90,000 + $50,000) / $28
Number of Units = 5,000 units

Therefore, the company must sell 5,000 units of the product to reach a profit of $90,000.