Question

Baker Company has established a profit objective of $364,000 before income tax. Its product sells for $60 per unit. The variable cost to produce and sell the product is $48 per unit. The fixed cost of this operation is $428,000. The number of units of product that must be sold to achieve the profit objective is: ___________________

Answer 1

lets solve

selling price per unit = 60

variable cost = 48

contribution = 60-48 =12

Contribution margin is a product's price minus all associated variable costs, resulting in the incremental profit earned for each unit sold. The total contribution margin generated by an entity represents the total earnings available to pay for fixed expenses and to generate a profit

so to calculate the no of units to acheive desired profit is (fixed cost + desired profit ) / contribution margin per unit

= (428000+364000)/12 =792000/12 =66000

The number of units of product that must be sold to achieve the profit objective is 66000

hence solved