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hie
help me with this questionA COMPANY MANUFACTURES AND SELLS A SINGLE PRODUCT FOR WHICH THE VARIABLE COST IS $28 PER UNIT.
THE CS RATIO IS 30%,AND THE COMPANY HAS FIXED COSTS OF $21 600 PER YEAR.
HOW MANY UNITS DOES THE COMPANY NEED TO SELL TO ARCHIEVE A TARGET PROFIT OF $60 000 (TO THE NEAREST UNIT)?A 32 281 UNITS
B 6 800 UNITS
C 1 300 UNITS
D 5 500 UNITSPlease don’t type in capital letters.
If the CS ratio is 30% then the variable cost must be 70% of selling price, and therefore the selling price must be 28/70% = $40 per unit.
For a profit of $60,000, the revenue must be (fixed cost + target profit) / CS ratio
which is: (21,600 + 60,000) / 30% = $272,000Since the selling price is $40 per unit, then need to sell 272,000 / 40 = 6,800 units.
(I assume that you have watched my free lectures on CVP analysis. The lectures are a complete free course for Paper F5 and cover everything needed to be able to pass the exam well.)
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