CAF-5 · Chapter 13 · Question 4 of 10
A company plans to sell its product for Rs. 53 per unit. The expected variable cost is Rs. 21 per unit, and the total fixed costs for the year are Rs. 220,000. If the company wishes to achieve a target profit of Rs. 40,000, how many units must it sell?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) 8,125 units
Explanation
Contribution per unit = Selling Price (53) - Variable Cost (21) = Rs. 32. To find target sales units: (Fixed Costs + Target Profit) ÷ Contribution per unit. (220,000 + 40,000) ÷ 32 = 260,000 ÷ 32 = 8,125 units.
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