Maintaining Profit After Cost Increase Steps:

• Fixed costs = (500 units × $40 contribution) -$2,000 profit = $20,000 -$2,000 = $18,000.
• New contribution per unit = $40 -$4 material cost rise = $36.
• Equation for same profit: Q × $36 -$18,000 = $2,000.
• Q = ($2,000 +$18,000) / $36 =$20,000 / $36 ≈ 555.56 units, rounds to 556.

Why D is correct:

• 556 units exactly offsets the $4 contribution drop to yield$20,000 total contribution, matching original profit via profit formula.

Why the others are wrong:

• A. 450 units: Yields only $16,200 contribution, profit of -$1,800 (shortfall).
• B. 455 units: Yields $16,380 contribution, profit of -$1,620 (insufficient).

Final answer: D