Answer: 1: 40,000 units
2: $225,000
Explanation
1. Contribution margin in dollars = Total fixed costs + Target profit
= $50,000 + $30,000
= $ 80,000
Contribution margin in units = Selling price - Variable costs
= 5 - 3
= $ 2 per unit
Units sell = Contribution margin in dollars / Contribution margin in units
= $ 80,000 / 2
= 40,000 unis
2 . Contribution margin ratio = Contribution margin in units / Selling price
= 2 / 5
= 40%
Target sales in dollars = (Total fixed costs + Target profit) / Contribution margin ratio
= ($50,000 + $40,000) / 40%
= $ 90,000 / 40%
= $225,000
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