Question

If fixed costs are $1,500,000, the unit selling price is $250, and the unit variable costs are $130, what is the amount of sales (in units) required to realize an operating income of $300,000?

Answer 1

Answer:

15,000 units

Explanation:

The computation of the  break even point in units after considering the desired profit is shown below:

= (Fixed cost + desired operating income) ÷ (Contribution margin per unit)

where,  

Contribution margin per unit = Selling price per unit - Variable expense per unit

= $250 - $130

= $120

And the other values of items will remain the same now placing these values in the formula above.

So the units would be

= ($1,500,000 + $300,000) ÷ ($120)

= ($1,800,000) ÷ ($120)

= 15,000 units