How to Calculate the Number of Units Needed to Make a Profit

How many units would Deja Brew, Inc., need to sell to make $10,000?

Round to the nearest whole pallet.

a) 10 pallets
b) 100 pallets
c) 110 pallets
d) 120 pallets

Final answer:

To make a profit of $10,000, Deja Brew, Inc. needs to sell 60 pallets.

Explanation:

The student has posed a problem related to determining the number of units needed to sell in order to achieve a target profit within the context of a business/commerce subject. The equation to solve the problem is based on the concept of the contribution margin and break-even point analysis.

To calculate the number of pallets Deja Brew, Inc., needs to sell to make $10,000, the following steps should be taken:

Firstly, calculate the contribution margin (CM) per pallet: CM = Selling price per pallet - Variable cost per pallet = $600 - $100 = $500.

Next, determine the total amount needed to achieve both the desired profit and cover the fixed costs: Total amount = Desired profit + Annual fixed costs = $10,000 + $20,000 = $30,000.

Finally, calculate the number of pallets needed to reach the total amount: Total amount / CM = $30,000 / $500 = 60 pallets.

Therefore, Deja Brew, Inc., needs to sell 60 pallets to make a profit of $10,000.