CIMA BA2 · Chapter 10 · Question 12 of 12
A product sells for $50 per unit and has variable costs of $30 per unit. Fixed costs are $120,000. How many units must be sold to earn a profit equal to 10% of sales revenue?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) 8,000 units
Explanation
Target profit per unit = 10% x $50 = $5. Each unit provides $20 contribution, of which $5 is needed as profit, leaving $15 to cover fixed costs. Units = $120,000 / $15 = 8,000. Check: revenue $400,000, contribution $160,000, profit $40,000 = 10% of revenue.
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