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Hughes Company manufactures harmonicas which it sells for​ $31 each. Variable costs for each unit are​...

Hughes Company manufactures harmonicas which it sells for​ $31 each. Variable costs for each unit are​ $18 and total fixed costs are​ $3,925. How many units must be sold to earn income of​ $5,500?

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Answer #1

Contribution margin = Fixed cost + Target income

= $3,925 + $5,500

= $9,425

Contribution margin per unit = Selling price - variable cost

= $31 - $18

= $13

Units must be sold to earn income of $5,500 = Contribution margin / Contribution margin per unit

= $9,425 / $13

= 725 units

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