Number of sales unit required

Question

If a fixed cost are Rs 60000. Pv ratio is 40% and the desired profit is Rs 450000 at selling price of Rs 15 per unit . then the number of sales unit required to achieve the target is
A. 30000
B. 40,000
C. 85000
D. 160000

Answer 1

Answer: C. 85,000 units

Simple steps:

Required sales value

= (Fixed cost + Desired profit) ÷ P/V ratio

= (60,000 + 450,000) ÷ 40%

= 510,000 ÷ 0.40

= 1,275,000

Now convert sales value into units:

Number of units

= 1,275,000 ÷ 15

= 85,000 units

Why:

The P/V ratio means 40% of sales becomes contribution. That contribution must cover both:

1. fixed cost = 60,000
2. desired profit = 450,000

So total contribution needed = 510,000, which requires 85,000 units in sales.