Asked by Zakia Pollard on Jun 10, 2024
Verified
Piper Technology's fixed costs are $1,500,000, the unit selling price is $250, and the unit variable costs are $130. The amount of sales required to realize an operating income of $200,000 is
A) 14,167 units
B) 12,500 units
C) 16,000 units
D) 11,538 units
Sales Required
The minimum sales needed to achieve a specific financial goal or to cover costs.
- Determine the point at which costs and revenues balance, measured in units and dollars, accounting for variations in fixed and variable costs, as well as adjustments in selling prices.
- Apply the concept of margin of safety and its significance in break-even analysis.
Verified Answer
PR
Prrannav ReddyJun 11, 2024
Final Answer :
A
Explanation :
To find the sales required to achieve a specific operating income, we use the formula: Sales = (Fixed Costs + Desired Operating Income) / (Selling Price per Unit - Variable Cost per Unit). Plugging in the given values: Sales = ($1,500,000 + $200,000) / ($250 - $130) = $1,700,000 / $120 = 14,166.67 units. Since we can't sell a fraction of a unit, we round up to the nearest whole unit, resulting in 14,167 units.
Learning Objectives
- Determine the point at which costs and revenues balance, measured in units and dollars, accounting for variations in fixed and variable costs, as well as adjustments in selling prices.
- Apply the concept of margin of safety and its significance in break-even analysis.
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