Question

A manufacturer has a monthly fixed cost of $60,000 and a production cost of S10 for each unit produced. The product sells for $15/unit. How many units should the firm produce in order to realize a minimum monthly profit of $5000?

Answer 1

13,000 units

Explanation:

Given that

The monthly fixed cost is $60,000

The production cost is $10 per unit

And, the selling cost is $15 per unit

The minimum monthly profit is $5,000

We need to find out the number of units to be produced to earn a profit

So

Here we have to determine the break even points in units

We know that

Break even point in units is

= (Fixed cost + target profit) ÷ (contribution margin per unit)

= ($60,000 + $5,000) ÷ ($15 - $10)

= $65,000 ÷ $5

= 13,000 units