The following data are for Jay Robert Company Breakeven sale

The following data are for Jay Robert Company.

Breakeven sales revenue                                                  $250,000

Selling price per unit                                                                     $10

Contribution margin ratio                                                          75%

Calculate the number of units that must be sold to generate net income of $50,000.

  120,000 units

  18,333 units

  40,000 units

  95,000 units

  31,667 units

Solution

To calculate the number of units that must be sold to generate a net income of $50,000, we need to calculate the value of fixed costs with the use of following formula:

Fixed Costs = Breakeven Sales Revenue*Contribution Margin Ratio

The number of units can be calculated with the use of following formula:

Number of Units = (Desired Profit + Fixed Costs)/Contribution Margin Per Unit

Where Contribution Margin Per Unit = Selling Price - Variable Cost

Variable Cost = (1-Contribution Ratio)*Selling Price

_________

Solution:

Using the information provided in the question, we get,

Fixed Costs = 250,000*75% = $187,500

Desired Units = (50,000 + 187,500)/(10 - (1-75%)*10) = 31,667 units (which is Option D)