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The CEO of RV USA is trying to estimate sales based on a budgeted target profit before taxes of $150,000. If unit contribution margin is $5,000, total sales in June are estimated at $900,000 and fixed costs are $500,000, how many RVs must be sold to attain the target profit before taxes?

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Answer:

The number of RVs must be sold to attain the target profit before taxes: 130 units

Explanation:

The number of units must be sold to meet the target profit figure are calculated by using following formula:

The number of units must be sold = (Total fixed cost + Targeted profit) / Contribution margin per unit.

RV USA estimates target profit before taxes of $150,000. Unit contribution margin is $5,000 and fixed costs are $500,000.

The number of units must be sold = ($500,000 + $150,000)/$5,000 = 130 units

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