Question

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

Answer 1

3,500 units

Step-by-step explanation:

The computation of the break even units to attain monthly operating income is shown below:

= (Fixed expenses + target profit) ÷ (Contribution margin per unit)

where,

Contribution margin per unit = Selling price per unit - Variable expense per unit

= $50 - $20

= $30

And, the other items values would remain the same

Now put these values to the above formula

So, the value would equal to

= ($80,000 + $25,000) ÷ ($30)

= ($105,000 ÷ ($30)

= 3,500 units