Question

You are currently trying to decide between two cost structures for your business: one that has a greater proportion of short-term fixed costs and another that is more heavily weighted to variable costs. Estimated revenue and cost data for each alternative are as follows: Selling price per unit Variable cost per unit Short-term fixed costs per year Cost Structure Alternative 1 Alternative 2 $ 100 100 90 85 100,000 105,000 Required: 1. What sales volume, in units, is needed for the total costs in each cost-structure alternative to be the same? 2. Suppose your profit goal for the coming year is 5% of sales (i.e., operating profit/sales = 5%). What sales level in units is needed under each alternative to achieve this goal? 3. Suppose again that your profit goal for the coming year is 5% of sales. What sales volume in dollars is needed under each alternative to achieve this goal? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 What sales volume, in units, is needed for the total costs in each cost-structure alternative to be the same? Sales volume (in units)

Answer 1

IndiHerence poinh Dterence in trea COsr Difference tn Yauakle cos 10o.000 105/000 5000 Sales coolumet in unth) 1000 2. Requuiect Sate toolume opetating Pucti 5% Sales Aturative-1 opeatung puchh Contuibution-Pired Co let x be no o units Contubuton bloo-$90 $10. 910x-4(00.00O 5 1Ox-100000 5x 52 1001000 2 0,000 uni

PLkinatiee OontuiputonI00 486- 16 15x-4105.000 .. 4105.000 5x $105000 10x- ne 10500unts Alteuratui -1 Atenaf- 2 10.500 20.000 Requiled Salee (uni) Sales Volume in dolla = Alteratu 1 sor000x$100 248/000,000 Aiteunatu 10,000 4100 $1,060 000 Aleerafu-Arteinal 2,0001000$1,050.0op Requed salei Cdothu)