A Product Sells for $20 Per Unit,and Has a Contribution

question 15

Multiple Choice

A product sells for $20 per unit,and has a contribution margin ratio of 40%.Fixed expenses total $120,000 annually.The company that makes and sells the product has an income tax rate of 40%.How many units must be sold to yield an after-tax operating profit of $30,000?

• A) 21,250 units.
• B) 18,750 units.
• C) 24,375 units.
• D) 14,167 units.

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Definitions:

Accounts Receivable

Money owed to a company by its clients or customers for goods or services delivered but not yet paid for.

Accounts Payable

The amounts owed by a business to its suppliers or vendors for goods or services received that have not yet been paid for.

Unearned Revenue

Money received by an individual or company for a service or product that has yet to be provided or delivered.

Accounting Equation

The fundamental equation representing the relationship among assets, liabilities, and owner's equity: Assets = Liabilities + Owner’s Equity.