The Formula for Calculating Units Required to Meet Target Operating

question 67

Multiple Choice

The formula for calculating units required to meet target operating income is

• A)(total fixed costs plus target operating income) divided by contribution margin per unit.
• B)total fixed costs divided by (contribution margin plus target operating income).
• C)contribution margin per unit divided by (total fixed costs plus target operating income).
• D)(contribution margin plus target operating income) divided by total fixed costs.

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Definitions:

Total Owner's Equity

Represents the residual interest in the assets of a company after deducting liabilities; it essentially reflects the owner's claim against the company's assets.

Poor Business Conditions

Suboptimal circumstances affecting commerce, often marked by reduced consumer spending, high unemployment, and economic downturn.

Statement of Cash Flows

It delineates how modifications in accounts on the balance sheet and income levels affect cash and near-cash items, breaking down the scrutiny into operating, investing, and financing categories.

Income Statement

A financial statement that shows a company's revenues, expenses, and profits over a specified period of time, indicating its financial performance.