A product sells for Rs. 100 per unit, has a variable cost of Rs. 60 per unit, and total fixed costs are Rs. 80,000. How many units must be sold to earn a target profit of Rs. 40,000?
Correct answer: C. 3,000 units
- A. 1,200 units
- B. 2,000 units
- C. 3,000 units
- D. 4,000 units
Explanation
The contribution per unit is Rs. 40. Required units equal fixed costs plus target profit divided by contribution per unit, or Rs. 120,000 divided by Rs. 40, giving 3,000 units.
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About Cost Accounting
Cost accounting measures and analyses the cost of producing goods or providing services for planning, control and pricing decisions. It covers direct and indirect costs, fixed and variable costs, job and process costing, break-even analysis, marginal costing, overhead allocation, and the difference between product cost and period cost.
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