Question

12. How many units must be sold if contribution margin is 50, fixed costs are $5,000 and profits are $30,000?*

700 units

600 units

500 units

900 units

Answer 1

I’m assuming you mean that the contribution margin is $50 not 50. Contribution margin usually takes into account variable costs but not fixed costs. Assuming the profits take into account fixed costs this means that the net contribution should be $35,000 ($30,000 profit + $5,000 fixed costs = net contribution). That means that 700 units must be sold in order to generate $35,000 (700 x $50)