A product sells for $20 per unit, and has a contribution margin ratio of 40%. Fixed expenses total $120,000 annually. How many units must be sold to yield a profit of $30,000?

A) 12,500 units.
B) 20,000 units.
C) 18,750 units.
D) 25,000 units.

Question

Jasmine Malone · Accepted Answer

Final Answer : C, Explanation :  We can use the following formula to calculate the number of units that must be sold to yield a profit:(units sold)(contribution margin per unit) - fixed expenses = profitWe know that the contribution margin ratio is 40%, which means that the contribution margin per unit is 40% of the selling price, or $8.We also know that we want to yield a profit of $30,000, so we can plug in the values we have and solve for units sold:(units sold)(8) - 120,000 = 30,000(units sold)(8) = 150,000units sold = 18,750Therefore, we need to sell 18,750 units to yield a profit of $30,000.

A product sells for $20 per unit, and has a contribution margin ratio of 40%. Fixed expenses total $120,000 annually. How many units must be sold to yield a profit of $30,000?

A) 12,500 units.
B) 20,000 units.
C) 18,750 units.
D) 25,000 units.

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Learning Objectives

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A product sells for $20 per unit, and has a contribution margin ratio of 40%. Fixed expenses total $120,000 annually. How many units must be sold to yield a profit of $30,000?A) 12,500 units.B) 20,000 units.C) 18,750 units.D) 25,000 units.

Definitions

Learning Objectives

Learning Objectives

Related questions

A product sells for $20 per unit, and has a contribution margin ratio of 40%. Fixed expenses total $120,000 annually. How many units must be sold to yield a profit of $30,000?

A) 12,500 units.
B) 20,000 units.
C) 18,750 units.
D) 25,000 units.