Question

Ocean City Kite Company sells kites for $11.50 per kite. In FY 2019, total fixed costs are expected to be $250,000 and variable costs are estimated at $3.00 a unit. Ocean City Kite Company wants to have a FY 2019 operating income of $90,000. Use this information to determine the number of units of kites that Ocean City Kite Company must sell in FY 2019 to meet this goal. (Round your answer to a whole number)

Answer 1

40,000 kits

Step-by-step explanation:

The computation is shown below:

Number of kits required to be sold to meet the goal = Total Contribution Margin Required ÷ Contribution Margin per Unit

where,

Total contribution margin required is

= Total fixed cost + operating income

= $250,000 + $90,000

= $340,000

And, the

Contribution Margin per Unit = Selling Price per Unit - Variable Cost per unit

= $11.50 - $3

= $8.50

So, the number of kits required is

= $340,000 ÷ $8.50

= 40,000 kits