Required Sales Revenue for Target Profit After Cost Increases

Steps:

• New fixed costs: $3000 +$500 = $3500
• New variable cost per unit: $15 +$5 = $20
• Contribution margin per unit: $40 -$20 = $20
• Units needed: ($3500 +$2000) / $20 = 275
• Sales revenue: 275 × $40 =$11000

Why D is correct:

• D equals the sales revenue from the target profit formula: [(New fixed costs + target profit) / new contribution margin] × selling price per unit.

Why the others are wrong:

• A: Uses original costs, yielding $8000 revenue for unchanged scenario.
• B: Applies new fixed costs but original contribution margin, resulting in $8800.
• C: Uses new contribution margin but original total coverage ($5000), giving$10000.

Final answer: D