A company desires to earn target net income of 42000 from th

A company desires to earn target net income of $42,000 from the sale of its product. If the unit sales price is $12, unit variable cost is $7, and total fixed costs are $56,000, how many units must the company sell to earn its target net income?

Solution

Contribution margin=Sales-Variable costs

=(12-7)=$5 per unit

Target Contribution margin=Fixed cost+Target profits

=(42000+56000)=$98000

Hence unit sales=(98000/5)

=19600 units.