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CMA Foundation · Fundamentals of Financial and Cost Accounting · Application of Cost Accounting for Business Decisions

Sharma Traders sells a product at ₹80 per unit with variable cost ₹48 per unit. Fixed costs are ₹3,20,000. How many units must be sold to earn a profit of ₹1,60,000?

15,000 units are needed. Contribution is ₹32 per unit, and the contribution required equals fixed costs plus target profit, ₹4,80,000. Dividing ₹4,80,000 by ₹32 gives 15,000 units. Break-even of 10,000 units would give no profit.

  1. A10,000 units
  2. B15,000 unitsCorrect
  3. C6,000 units
  4. D12,000 units

Explanation

Contribution per unit = 80 - 48 = ₹32. Required units = (3,20,000 + 1,60,000)/32 = 4,80,000/32 = 15,000 units. Using only fixed costs gives 10,000 units, which is the break-even point and ignores the target profit.

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