Answer:
Cunningham, Inc. must sell 10,000 MP3
Explanation:
Giving the following information:
Cunningham, Inc. sells MP3 players for $60 each.
Variable costs are $40 per unit.
Fixed costs total $60,000.
Net income= 140,000
We need to use the break-even formula:
break-even (units)= (fixed costs + net income)/ (selling price - variable costs)
break-even (units)= (60000 + 140000)/ (60 - 40)= 10000 units
The number of MP3 players that Cunningham must sell to earn a net income of $140,000 is 4000.
Net income is total cost less total revenue. Total cost consists of fixed cost and variable cost. Fixed cost is the cost that does not change with the level of output. Variable cost is the cost that has a positive relationship with the level of output
Net income = total revenue - total cost
Net income = total revenue - (fixed cost + variable cost)
$140,000 = $60x - ($40x + $60,000)
$80,000 = 20x
x = 4000
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