Question

Dog Emporium reported the following information for the sales of their single product: Total Per Unit...

Dog Emporium reported the following information for the sales of their single product:

Total Per Unit
Sales $ 300,000 $ 10
Variable expenses 180,000 6
Contribution margin 120,000 $ 4
Fixed expenses 100,000
Net operating income $ 20,000

Dog's salesmen have proposed to decrease the selling price by 50 cents per unit. How many units will need to be sold for Dog to earn at least the same net operating income?

Multiple Choice

  • 5,715 units

  • 36,000 units

  • 34,286 units

  • 28,572 units

Business   Accounting   
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Answer #1
Correct Option C i.e. 34386 Units
Working Note :
After decreasing selling price by 50 cents contribution margin also fall by 50 cents
Target units =( Total fixed cost + Target Income )/Contribution margin per unit
    =(100000 + 20000) / 3.5
                                                                  34,286 Units
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