Question

Data concerning Howell Enterprises’ single product appear below:

Selling price per unit..........................$200

Variable expense per unit....................$70

Fixed expenses per month.........$559,000

To attain a target profit of $14,000, they need to sell approximately:  

Answer 1

Contribution Required =  target profit + Fixed expenses

= $14,000 +$559,000

= $ 573,000

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

= $ 200 - $ 70

= $ 130

Sales in units required to attain the required profit= Contribution Required / Contribution margin per unit

= $ 573,000 / $ 130

= 4407.69 units

= 4408 Units

Sales in dollars required to attain the required profit= Sales in units required to attain the required profit * Selling Price per unit

= 4407.69 * $ 200

= $ 881,538

Hence the correct answer is 4408 units or $ 881,538

Note: The answer is rounded off to whole numbers.