Given a target operating income of $45,000 and a contribution margin of $500 per unit, how many units need to be sold to achieve the desired operating income?

Multiple choice question for Capacity Analysis and Inventory Costing. Select an option, then review the explanation below.

Explanation

To find the required units sold, divide the target operating income by the contribution margin per unit: 45,000 ÷ 500 = 90 units. Therefore, 90 units must be sold to reach the target operating income.

Practice related questions from the same subject.

1.What term describes the operational capacity that is below the theoretical maximum capacity?
2.Under the Variable Costing approach, how are fixed manufacturing overhead costs handled during the accounting period?
3.What does the denominator represent in the fixed manufacturing cost rate calculation?
4.Which of the following is used to determine product capacity, cost analysis, performance assessment, and compliance with regulations?
5.In absorption costing, which format does the income statement typically use?

Given a target operating income of $45,000 and a contribution margin of $500 per unit, how many units need to be sold to achieve the desired operating income?

Explanation

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