ABC, Inc. produces a product that has a variable cost of $2.50 per unit. The company's fixed costs are $30,000. The product is sold for $5.00 per unit and the company desires to earn a target profit of $10,000. What is the amount of sales that will be necessary to earn the desired profit? (Do not round intermediate calculations.)

Question

Harrison Charles

Business

6 January, 05:37

ABC, Inc. produces a product that has a variable cost of $2.50 per unit. The company's fixed costs are $30,000. The product is sold for $5.00 per unit and the company desires to earn a target profit of $10,000. What is the amount of sales that will be necessary to earn the desired profit? (Do not round intermediate calculations.)

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Answers (1)

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Matias Arroyo · Answer 1

The amount of sales that will be necessary to earn the desired profit is 16000 units

Explanation:

To get the amount of sales to earn $10000, we make the following equation.

Profit = Sales - variable cost-fixed cost

Profit=10000

Sales=$5.00x

Variable cost = $2.50x

Fixed cost=$30,000

Replacing,

10000=5x-2.5x-30000

10000+30000=2.5x

x=40000/2.5

x=16000