You are provided with production activity information for Funky Fur Fedoras, Inc

Question

You are provided with production activity information for Funky Fur Fedoras, Inc. The company has a target profit of $200,000. Calculate the number of units the company needs to sell to reach this target profit.

Direct Materials 75.00 per unit
Direct Labor 15.00 per unit
Variable Overhead 17.00 per unit
Fixed Overhead 22.00 per unit
Variable Selling 13.00 per unit
Fixed General and administrative 23.00 per unit
Units Produced 4,000 per month
Units in beginning finished goods - 0
Units Sold 3,950
Selling Price 220 per unit
Target Profit 200,000 per month

Explanation / Answer

Contribution margin is (220- 75-15-17-13)= 100 per unit. Fixed overhead is 22*4000= 88,000 (I assume the per unit is per unit produced) Fixed G&A is 23*4000= 92,000 So we need to cover 88,000+92,000+ 200,000(profit)= 380,000. So we need to sell 380,000/100= 3,800 units to make the 200,000 profit.

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