Sales Volume Reduction to Maintain Profit

Steps:

• Original contribution: ($750 -$550) × 600 = $120,000; profit =$120,000 - $60,000 =$60,000.
• New contribution per unit: $750 -$500 = $250.
• Units for $60,000 profit: ($60,000 + $60,000) /$250 = 480.
• Reduction: 600 - 480 = 120 units.

Why A is correct:

• Matches contribution margin approach: total contribution must cover fixed costs plus target profit.

Why the others are wrong:

• B: Overstates reduction by misapplying full cost savings without fixed cost adjustment.
• C: Equals original units times cost ratio, ignoring profit target.
• D: Equals new required units, not the reduction from original.

Final answer: A