1. Fenwick Outlet Inc. sells a single product for $10. Variable costs are $2 per unit and fixed costs total $130,000 at a volume level of 8,200 units. What dollar sales level would Fenwick have to achieve to earn a target profit of $130,000?
Multiple Choice
$450,000. $82,000. $750,000. $325,000. $550,000.
Answer : OPTION " D" $ 325,000
Desired Sales = | Units to be sold to earn desiredprofit* Selling price per Unit | |||||
Units to be Sold to earn desired profit | =(Fixed Cost + Desired profit )/ Contribution per unit | |||||
Contribution per Unit = | Selling price - Variable cost | |||||
Contribution per unit = Seling price per unit - Variable Cost | ||||||
= $10-$2 | ||||||
= $8 | ||||||
Units to be sold to earn desired profits = | ($130,000 + $130,000) / $8 | |||||
= | 32500Units | |||||
Dollar Sales = | Units to be sold * Selling price per unit | |||||
=32500 * 10 | ||||||
=$ | 325000 |
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