Fantasy Corporation manufactures a single product. The selling price is $125 per unit, and variable costs amount to $81 per unit. The fixed costs are $28,500 per month (round any units to the next highest full unit). How many units must be sold each month to earn a monthly operating income of $50,000

The correct answer is 1,785 Units.

Explanation:

According to the scenario, the given data are as follows:

Selling price per unit = $125

Variable cost = $81

Fixed cost = $28,500

Target monthly income = $50,000

So, we can calculate the units to sell to earn monthly target income by using following method:

Units required = (Profit required + fixed cost ) ÷ contribution margin

Where,Contribution Margin = $125 - $81 = 44

By putting the value, we get

= ($ 50,000 + $28,500) ÷ 44

= 1,785 units

Desired sales units = 1,785 units

Explanation:

Given:

Selling price = $125 per unit

Variable cost = $81 per unit

Fixed cost = $28,500 per month

Desired profit = $50,000

Desired sales units = ?

Computation of contribution per unit:

Contribution per unit = Selling price - Variable cost

Contribution per unit = $125 - $81

Contribution per unit = $44

Computation of desired sales units:

Desired sales units = (Desired profit + Fixed cost ) / Contribution per unit

Desired sales units = ($50,000 + $28,500) / $44

Desired sales units = 1,784.09091

Desired sales units = 1,785 units