Question

Sam's Dog toys sells a Red toy and a Blue toy. The contribution margin for the Red toy is $2 and for the Blue toy is $3. The expected sales mix is 80% for Red toy and 20% for Blue toy. The total fixed costs amount to $2,112 and the company desires to earn a profit of $264. What is the sale volume in units necessary to reach the desired profit?

1,056 total units

960 total units

120 total units

1,080 total units

Answer 1

Formula	particular	Red toy	Blue toy	Total
a	Contribution margin	$                 2.00	$          3.00
b	mix	80%	20%
c=a*b	Contribution mix margin	$                 1.60	$          0.60	$          2.20
d	Fixed cost =			$   2,112.00
e	desired profit =			$      264.00
f=e+d	Fixed cost + profit			$   2,376.00
g=f/c	required unit =			1080
	therefore answer =			1,080 total units