Which of the Following Equations Calculates the Number of Units

question 95

Multiple Choice

Which of the following equations calculates the number of units to sell to earn a targeted income?

• A) Number of Units to Earn Target Income = (Total Fixed Cost + Target Income) / Contribution Margin per Unit
• B) Number of Units to Earn Target Income = (Fixed Costs + Target Income) / Sales
• C) Number of Units to Earn Target Income = Fixed Costs / Contribution Margin Ratio
• D) Number of Units to Earn Target Income = Variable Costs / Contribution Margin Ratio
• E) Number of Units to Earn Target Income = Total Cost / Contribution Margin per Unit

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Definitions:

Call Option

An economic agreement allowing the buyer the choice, yet not mandating, to purchase an asset at an agreed-upon price within a designated duration.

Option

A financial derivative that gives the buyer the right, but not the obligation, to buy or sell an underlying asset at a specified price on or before a specified date.