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Smith, Inc. sells a product with a contribution margin of $40. Fixed costs are $5,000 per...

Smith, Inc. sells a product with a contribution margin of $40. Fixed costs are $5,000 per month. How many units must Smith sell to earn an operating income of $10,000 next month? Group of answer choices 375 400 250 125

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Answer #1

Computation the number of sales units is:

Number of sales units = (Value of fixed costs + Value of next month income) / Value of contribution of each unit

= ($5,000 + $10,000) / $40

= $15,000 / $40

= 375 units

Hence, the number of sales units is 375, that is, the 1st option is correct.

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