Summer Company sells a product with a contribution margin ra

Summer Company sells a product with a contribution margin ratio of 60%. Fixed costs are $650 per month. What amount of sales (in dollars) must Summer Company have to earn an operating income of $7,000? If each unit sells for $30, how many units must be sold to achieve the desired operating income?

Solution

Ans:

Required sales in units = (Fixed costs + Target profit) / Contribution margin per unit

                                          = ($650 + $7000) / $30 per unit × 60% = 425 units