A venture capital investment group received a proposal from Wireless Solutions to produce a new smart phone. The variable cost per unit is estimated at $250, the sales price would be set at twice the VC/unit, fixed costs are estimated at $750,000, and the investors will put up the funds if the project is likely to have an operating income of $500,000 or more. What sales volume would be required in order to meet this profit goal?

4,513

4,750

5,000

5,250

5,513

Question

Business

Moriah

12 September, 00:20

A venture capital investment group received a proposal from Wireless Solutions to produce a new smart phone. The variable cost per unit is estimated at $250, the sales price would be set at twice the VC/unit, fixed costs are estimated at $750,000, and the investors will put up the funds if the project is likely to have an operating income of $500,000 or more. What sales volume would be required in order to meet this profit goal?

4,513

4,750

5,000

5,250

5,513

+4

Answers (1)

Know the Answer?

Corbin Daniel · Answer 1

5,000

Explanation:

Variable cost per unit = $250

Sales price would be set at twice the VC/unit

Therefore, Sales price = 2 * $250

= $500

Fixed costs = $750,000

If operating income of $500,000 or more is expected

Let the sales volume be y, then

500y - 750,000 - 250y = 500,00

250y = 750,000 + 500,000

250y = 1,250,000

y = 1,250,000/250

y = 5,000

Minimum sales volume to have an operating income of $500,000 or more is 5,000.