A Product Has a Contribution Margin of 20% and Sells

question 183

Multiple Choice

A product has a contribution margin of 20% and sells for $100.00 per unit. Assuming fixed costs of $2 million and a goal to have an EBIT of $1 million, how many units of the product must be sold?

• A)100,000 units
• B)50,000 units
• C)120,000 units
• D)150,000 units

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Definitions:

Manufacturing Overhead

refers to all the indirect costs associated with the production process, excluding direct materials and direct labor.

Direct Labor-Hours

The total time worked by employees directly involved in manufacturing a product or providing a service.

Job Cost

The total cost associated with producing a specific job or order, including materials, labor, and overhead.

Product Costs

Expenses directly incurred from the manufacturing process, including direct materials, direct labor, and manufacturing overhead.