Prepared Partnership prepared the following contribution format income statement
ID: 386952 • Letter: P
Question
Prepared Partnership prepared the following contribution format income statement based on a sales volume of 1,000 units (the relevant range of production is 600 units to 1,800 units):
Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $40,000
Variable expenses. . . . . . . . . . . . . . . . . . 24,000
Contribution margin. . . . . . . . . . . . . . . . 16,000
Fixed expenses. . . . . . . . . . . . . . . . . . . . . 12,000
Net operating income. . . . . . . . . . . . . . . $ 4,000
Required:
How many units must be sold to achieve a target profit of $5,000
Please give step by step instructions
Explanation / Answer
Sales = $40,000
Total Expense = Variable Expense + Fixed Expense
= $36,000
Therefore, for sale of 1000 units the Income = 4000
In order to make the income $5000, the sales would have to be = (1000/4000)*(5000)
= 1250 Units