Question

Pure Water Products produces two types of water filters. One attaches to the faucet and cleans all water that passes through the faucet. The other is a pitcher-filter that only purifies water meant for drinking. Revenue and cost information for each product appears below: the unit that attaches to the faucet is sold for $70 and has variable costs of $30 the pitcher-filter sells for $80 and has variable costs of $45 fixed costs total $424,000 • Pure Water sells 4 faucet models for every 3 pitcher-filters sold Calculate the number of units of the faucet-model that must be sold in order for Pure Water Products to earn a target profit of $212,000.

Answer 1

		Sale price	Variable cost	Contribution
	Faucet	$70	$30	$40
	Pitcher filter	$80	$45	$35
		Total fixed Cost=	$424,000
		Target profit	$212,000
		Required earnings	$636,000
	Let number of faucet models sold be 4x, then number of pitcher-filters sold would be 3x.
	Contribution for sale of faucet model:			4x*40
				160x
	Contribution for sale of pitcher-filters model:			3x*35
				105x
	Hence,	160x + 105x = 636,000
		265x = 636,000
		x = 2400
	Hence number of faucet models to to be sold = 4x = 4*2400 =				9600	units
	Hence number of picher-filter models to to be sold = 3x = 3*2400 =				7200	Units

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