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31 May, 13:14

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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  1. 31 May, 15:35
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    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
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