Question

RST Company produces a product that has a variable cost of $6 per unit. The company's fixed costs are $30,000. The product sells for $10 per unit. RST desires to earn a profit of $20,000. The sales level in units to achieve the desire profit is A company that sells multiple types of products has a selling price per composite unit of $150, variable cost per composite unit of $50 and total fixed costs of $25,000. The contribution margin per composite unit is:__________

Answer 1

The correct answer is "12,500 units" and "$100 per unit".

Step-by-step explanation:

Given:

Selling price,

= $10 per unit

Variable cost per unit,

= $6 per unit

Fixed cost,

= 30,000

Desired profit,

= 20,000

Now,

The contribution margin per unit will be:

=
`Selling \ price - Variable \ cost`

=
`10-6`

=
`4` ($) per unit

The required units will be:

=
`((Fixed \ cost+Desired \ profit))/(Contribution \ margin)`

=
`(30000+20000)/(4)`

=
`(50000)/(4)`

=
`12,500 \ units`

Now,

The contribution margin per composite unit will be:

=
`Selling \ price-Variable \ cost`

=
`150-50`

=
`100` ($) per unit