Question

Three years ago, Marissa Moore started a business that creates and delivers holiday and birthday gift baskets to students at the local university. Marissa sells the baskets for $33 each, and her variable costs are $23 per basket. She incurs $11,500 in fixed costs each year. How many baskets will Marissa have to sell this year if she wants to earn $30,400 in operating income? (Round answer to 0 decimal places, e.g. 5,275.)

Answer 1

Solution-

In order to calculate no. of unit to be sold for acheiving the desired profits,reverse calculation of contribution required must be done-

Net operating income required $ 30,400

Fixed cost $ 11,500

Contribution required $ 41,900

Contribution per unit $ 10 ($33-$10)

No. Of unit required to be sale for acheiving profits will be:

= Contribution required / Contribution per unit

= $ 41,900 / $ 10

= 4,190 units

Hence 4,190 units is required to sale to acheive profits of $ 30,400.

Please comment for any other explanation.

Thanks.