Question

**Ocean City Kite Company sells kites for $11.50 per kite.
In FY 2019, total fixed costs are expected to be $185,000 and
variable costs are estimated at $3.00 a unit. Ocean City Kite
Company wants to have a FY 2019 operating income of $80,000. Use
this information to determine the number of units of kites that
Ocean City Kite Company must sell in FY 2019 to meet this goal.
(Round your answer to a whole number)**

Answer #1

Solution: According to the question

Selling price per unit = $11.50

Variable cost per unit = $3.00

Contribution per unit = Selling price per unit - Variable cost per unit

= $11.50 - $3.00 = $8.50

Total Fixed Costs = $185,000

Target operating income = $80,000

Number of units to be sold to earn target operating income

= (Fixed Costs + Target operating income) / Contribution per unit

= ($185,000 + $80,000) / $8.50

= $265,000 / $8.50 = 31,176.47 units
**(rounded to 31,176 units)**

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