ITPEC FE Subject A April 2026 Question 59
Topic: Corporate ActivitiesAlso asked in April 2024
When a company wants to earn a profit of $42,000, which of following is the number of units that the company must sell under the conditions shown in the table below?
Unit: dollar
Explanation
18,200 units — divide fixed costs plus the target profit by the contribution margin per unit.
- •Fixed costs: 130,000 + 10,000 = 140,000 dollars
- •Variable cost per unit: 3 + 4 = 7 dollars
- •Contribution margin per unit: 17 − 7 = 10 dollars
- •Units: (140,000 + 42,000) ÷ 10 = 182,000 ÷ 10 = 18,200
Answer (b)
Why not others:
- •(a) 14,000 — 140,000 ÷ 10, the break-even volume; it covers the fixed costs but earns no profit
- •(c) 26,000 — 182,000 ÷ 7, dividing by the variable cost per unit instead of the contribution margin
- •(d) 26,200 — follows from no consistent use of the table; a decoy placed next to (c)
Key rule: Required volume is (fixed costs + target profit) ÷ (price − variable cost per unit); sort every table line into fixed or per-unit first, whatever its expense name.
Corporate Activities · AI-written, may contain errors
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