Question

Johnson's Plumbing's fixed costs are $700,000 and the unit contribution margin is $17. What amount of units must be sold in order to realize an operating income of $100,000

Answer 1

Answer:

Target profit in units = 47058.82 rounded off to 47059 units

Explanation:

The break even units of sales are the number of units that must be sold in order for the company to have enough total revenue to cover its total costs. It is a point in the number of units where there is no profit or no loss.

We can use the break even analysis and formulas to calculate the number of units required to earn a certain target profit. Thus, we will just need to add the target profit amount to the fixed costs in the break even in units formula. The formula to calculate the target profit in units is,

Target profit in units = (Fixed costs + Target profit) / Contribution margin per unit

Target profit in units = (700000 + 100000) / 17

Target profit in units = 47058.82 rounded off to 47059 units