Question

The Cotton Candy Company had the following information available regarding last year's operations: Sales (100,000 units)$200,000...

The Cotton Candy Company had the following information available regarding last year's operations:
Sales (100,000 units)$200,000
Variable Costs$100,000
Fixed Costs$50,000
How many units would have to be sold for a net income of $80,000?

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Answer #1

Contribution margin of Cotton candy = sales - variable cost

= 200,000 - 100,000 = $100,000

100,000 units are sold by Cotton candy

Cotton candy contribution margin per unit

= 100,000 / 100,000 = $1

Units sold to earn targeted profit = (fixed cost + targeted profit) / contribution margin per unit

Number of units sold to earn targeted profit of $80,000 by Cotton candy

= (80,000 + 50,000) / 1 = 130,000 units

130,000 units are needed to sold by Cotton candy company to earn targeted profit of $80,000.

  

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