Question

Question 10 windmill Pty Ltd makes miniature windmills for gardens. If the selling price per windmill is 100, the contribution margin ratio is 40% and total fixed costs are $25 00 how many windmills must they sell to achieve a desired profit of $20 000 625. 500 O 200. 1125

Answer 1

Windmills to be sold to get a desirable profit :

Using contribution margin analysis:

Sales = (Total Fixed cost + Desired Profit)/ Contribution

Margin Ratio

where sales = Selling Price per unit * Units to be sold

Let units to be sold be x

Therefore,

100x = (25000 + 20000)/ 0.4

x = 1125

Hence, 1125 Units should be sold at a selling price of $ 100, given that $ 25000 is the fixed cost and desired profit is $ 20000.