Question

M and M, Inc. produces a product that has a variable cost of $3.30 per unit. The company's fixed costs are $37,800. The product is sold for $6 per unit and the company desires to earn a target profit of $10,800. What is the amount of sales that will be necessary to earn the desired profit? (Do not round intermediate calculations.) Multiple Choice $267,600 $84,000 $132,600 $108,000

Answer 1

The correct answer is D.

Step-by-step explanation:

Giving the following information:

Selling price= $6

Unitary variable costs= $3.3

The company's fixed costs are $37,800.

Desired target profit of $10,800.

To determine the sales level to reach the objective, we need to use the break-even point in dollars formula with the desired profit.

Break-even point (dollars)= fixed costs/ contribution margin ratio

Break-even point (dollars)= (37,800 + 10,800) / [(6 - 3.3)/6]

Break-even point (dollars)= 48,600 /0.45

Break-even point (dollars)= $108,000