Hill & Scott Company sells a product for $20. Variable costs are $15 per unit, and...

Hill & Scott Company sells a product for $20. Variable costs are $15 per unit, and total fixed costs are $7,000. How many units must be sold by Hill & Scott to earn a profit of $1,000?

Expert Solution

All working forms part of the answer
Step 1: Find Contribution margin per unit

A	Sale Price per unit	$ 20.00
B	Variable cost per unit	$ 15.00
C = A - B	Contribution margin per unit	$ 5.00

Step 2: Find total Contribution margin required to earn target profits of $ 1,000

A	Fixed Cost	$ 7,000.00
B	Target Profits	$ 1,000.00
C = A+B	Total Contribution margin required to earn target income	$ 8,000.00

Step 3: Final Answer

A	Total Contribution margin required to earn target income	$ 8,000.00
B	Contribution margin per unit	$ 5.00
C = A/B	No. of units required to be sold to earn target profits	1,600 = ANSWER

Answer: No. of units to be sold = 1,600 units

ekkarill92 answered 3 years ago

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