Question

A company produces a product with variable costs of $2.50 per unit. The product sells for $5.00 per unit. The company has fixed costs of $3,000 and desires a profit of $10,000. The sales level in units to achieve the desired profit is _________ units.

Answer 1

The sales level in units to achieve the desired profit is 5200 units.

Explanation:

In order to evaluate the desired profit volume, the desired profit is simply added and divides it up by unit contribution to the fixed price.

Formula:
`\frac{ \text { (Fixed cost + Desired Profit) }}{\text{ Unit Contribution }}`

To Calculate Unit contribution: Price – Variable cost = 5.00 – 2.50 = $2.5

Now calculate desired profit value,
`\rightarrow ((\$3000+\$10,000))/((\$5.00-\$ 2.50))`

`\Rightarrow (13,000)/(2.5)=5200 \text{ units }`

The profit is 5200 units.

Answer 2

= 5,200

Step-by-step explanation:

Let the sales units be represented by variable X

Profit = Revenues -COGS -Fixed costs

Revenues = Selling price *X = $5X

COGS = $2.5X

Fixed costs = $3,000

Desired profit = $10,000

Therefore;

10,000 = 5X -2.5X - 3,000

Add 3,000 on both sides;

10,000 +3,000 = 2.5X

13,000 = 2.5X

Divide both sides by 2.5 to solve for X;

13,000/2.5 = X

X = 5,200

Therefore, the sales level in units is 5,200