Question

Beau Corporation sells a unit of its product for​ $250 per​ unit, while its variable costs per unit are​ $75. Fixed cost are budgeted at​ $325,000. How many units must Beau Corporation sell in order to earn a target income of​ $200,000. A. ​1,143 units B. ​1,858 units C. ​3,000 units D. ​2,500 units Using the information​ above, what is the contribution margin​ ratio? A. .70 B. .55 C. .30 D. .75

Answer 1

Number of units that must be sold to earn the target profit is 3000 units.

The contribution margin ratio is 0.70

Step-by-step explanation:

We will use the break even analysis modified for target profit to calculate the number of units needed to earn the desired

The break even point in units is calculated by dividing the fixed cost by the contribution margin per unit. To calculate the number of units required to earn the desired profit, we add the desired profit to fixed cost and divide it by the contribution margin per unit.

Contribution margin per unit = 250 - 75 = $175

Number of units required to earn target profit = (325000 + 200000) / 175

Number of units required to earn target profit = 3000 units

The contribution margin ratio is = 175 / 250 = 0.7 or 70%

Dollar Sales required to earn target profit = $4,812,500