Workshape Company Target Operating Income Calculation

How many units must be sold to achieve a target operating income of $60,000?

a. 180 units
b. 400 units
c. 200 units
d. 450 units
e. 275 units

Answer:

Option B: 400 Units of chairs must be sold to earn a target operating income of $60,000

To calculate the number of units that must be sold to achieve a target operating income of $60,000, we need to consider the contribution margin per unit. The contribution margin is the selling price per unit minus the variable cost per unit.

In this case, the selling price per chair is $400 and the variable cost per chair is $150. Therefore, the contribution per chair is $250 ($400 - $150). We can then use the formula:

Number of Units = (Target Operating Income + Total Fixed Expenses) / Contribution Per Unit

Plugging in the values: (40000 + 60000) / 250 = 400 units of chairs

Therefore, to achieve a target operating income of $60,000, Workshape Company must sell 400 units of chairs.