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3 November, 05:17

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

0
Answers (1)
  1. 3 November, 06:25
    0
    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.
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