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open tuition multiple choice
VC-$28 per unit
C/S ratio 30%
FC-21600
how many units has to be produced to earn $60,000 profit
Is there anything missing from the question coz the answer is 6800 of which i dont understand how it was calculatedNo – there is nothing missing 🙂
If the contribution is 30% of sales, the for every 100 sales, the contribution is 30 and therefore the variable costs are 70.
Therefore for every 70 variable cost, the contribution must be 30.
Therefore the contribution here must be 30/70 x 28 = 12 per unitTo earn a profit of 60,000 requires a contribution of 81,600.
So the number of units to be sold must be 81,600 / 12 = 6,800
(Our free lectures on CVP analysis will help you)
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