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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