US CMA Part 2 · Chapter 5 · Question 3 of 15
Oakham Audio sells speakers at $85 each with variable costs of $51 per unit. Fixed costs are $408,000 per year. How many units must be sold to earn a pre-tax profit of $136,000?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) 16,000 units
Explanation
Required units = (fixed costs + target profit) / CM per unit = ($408,000 + $136,000) / ($85 - $51) = $544,000 / $34 = 16,000 units. 12,000 units is only the breakeven point.
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