Question

2. The selling price is AED 200, Direct material per unit is AED 150 and direct labour per unit is AED 200, rent expense per month $6,000 and salary expense per month AED 50,000., utility expense per month AED 4,000. How many units should be sold to make an operating profit of AED 50,000 per month?

Answer 1

Direct material per unit	AED 150
Direct labor per Unit	AED 200
Variable cost per unit	AED 350

Answer is not possible due selling price is less than variable cost per unit.

Answer is possiable only if the selling price is more than variable cost per unit.

Rent expense	AED 6,000
Salary expense	AED 50,000
Utilities expense	AED 4,000
Fixed expense per month	AED 60,000

Answer is possible only if the selling price is more than variable cost per unit.

Additional information (Provided to understand the concept.)

if the selling price	AED 400	AED 450	AED 500	AED 550	AED 600
Selling price per unit	AED 400	AED 450	AED 500	AED 550	AED 600
Less: Variable cost per unit	AED 350	AED 350	AED 350	AED 350	AED 350
Contribution margin per unit	AED 50	AED 100	AED 150	AED 200	AED 250
Operating profit	AED 50,000	AED 50,000	AED 50,000	AED 50,000	AED 50,000
Fixed expense per month	AED 60,000	AED 60,000	AED 60,000	AED 60,000	AED 60,000
Total contribution required	AED 110,000	AED 110,000	AED 110,000	AED 110,000	AED 110,000
Divided by: Contribution margin per unit	AED 50	AED 100	AED 150	AED 200	AED 250
Units must be sold to make operating profit of AED 50,000	2,200	1,100	733	550	440