Question

Boland Company sells a product that is priced at $20 per unit. The per unit contribution margin is equal to 25 percent of the sales price. If fixed costs amount to $55,000 and the company has a desired profit of $20,000, the number of units that must be sold to earn the desired profit is:______

Answer 1

The number of units needed to be sold to earn a desired profit is 15000 units.

Step-by-step explanation:

The desired profit is the profit that a firm wants to earn. The umber of units needed to earn a desired profit can be calculated using the break even approach.

Under break even the number of units required to break even are calculated by dividing the total fixed costs by the contribution margin per unit.

To calculate the number of units needed to earn desired profit, we need to add the desired profit figure to the fixed cost and divide the total by contribution margin per unit.

The contribution margin per unit is = 20 * 0.25 = $5 per unit

The units needed to earn desired profit = (55000 + 20000) / 5

Units needed to earn desired profit = 15000 units