Question

Sultan Company produces a single product. The selling price is $50 per unit, and variable costs amount to $20 per unit. Sultan's fixed costs per month total $80,000. How many units must be sold each month to earn a monthly operating income of $25,000?

Answer 1

3,167 units

Step-by-step explanation:

As per the cots volume analysis, income is realized after attaining the break-even point.

To earn $25,000, the company will have to sell break-even points plus units worth $25,000

Break-even point is fixed cost/ contribution margin per unit

Break-even point = $80,000/( $50 -$20)

=$80,000/$30

=$ 2,666.66

=$2,667 units

Units for $25,000 will be =$25,000/ divided by selling price

=$25,000/$50

= 500 units

the company will have to sell

= 2667 + 500

=3,167 units