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1 December, 05:38

A product sells for $125, variable costs are $80, and fixed costs are $45,000. If the selling price can be increased by 20% with a similar increase in variable costs, how many fewer units would have to be sold to earn $300,000? (Round the answer to the nearest unit.)

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  1. 1 December, 06:57
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    The number of units must be sold to earn $300,000: 6389 units

    Explanation:

    The selling price after increasing = $125 + $125 x 20% = $150

    Variable costs after The selling price increasing = $80 + $80 x 20% = $96

    The number of units must be sold to meet the target profit figure are calculated by using following formula:

    The number of units must be sold = (Total fixed cost + Targeted profit) / Contribution margin per unit.

    In there:

    Contribution margin per unit = Sales price - Variable cost per unit = $150 - $96 = $54

    The number of units must be sold = ($45,000 + $300,000) / $54 = 6389 units
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