From the following information, find out the number of units that must be sold by the firm to earn profit of Rs. 1, 80,000 per year.

Sales price: Rs. 25 per unit
Variable manufacturing costs - Rs. 12 per unit
Variable selling costs - Rs. 3 per unit
Fixed factory overheads - Rs. 5, 00,000
Fixed selling costs - Rs. 3,00,000

Question

From the following information, find out the number of units that must be sold by the firm to earn profit of Rs. 1, 80,000 per year.

Sales price: Rs. 25 per unit

Variable manufacturing costs - Rs. 12 per unit

Variable selling costs - Rs. 3 per unit

Fixed factory overheads - Rs. 5, 00,000

Fixed selling costs - Rs. 3,00,000

Quintessence Classes · Accepted Answer

The correct answer is 98,000 units. Given:Selling price per unit = Rs. 25Variable manufacturing cost = Rs. 12Variable selling cost = Rs. 3Fixed factory overheads = Rs. 5,00,000Fixed selling costs = Rs. 3,00,000Desired profit = Rs. 1,80,000Step 1: Calculate contribution per unitContribution per unit = Selling price − Total variable costTotal variable cost = Rs. 12 + Rs. 3 = Rs. 15Contribution per unit = Rs. 25 − Rs. 15 = Rs. 10Step 2: Calculate total fixed costsFixed factory overheads = Rs. 5,00,000Fixed selling costs = Rs. 3,00,000Total fixed costs = Rs. 8,00,000Step 3: Calculate total contribution requiredTotal contribution required = Fixed costs + Desired profit= Rs. 8,00,000 + Rs. 1,80,000= Rs. 9,80,000Step 4: Calculate units to be soldUnits to be sold = Total contribution required ÷ Contribution per unit= Rs. 9,80,000 ÷ Rs. 10= 98,000 unitsAnswer: C. 98,000 units

Answer

60,000 units

Answer

88,000 units

Answer

1,00,000 units

Answer & Explanation

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