Question

A product sells for 200 per unit and its variable costs per unit are 130. The total fixed costs are 420000. If the firm wants to earn an income of 35000, how many units must be sold?

Answer 1

To find the profit-maximizing quantity, calculate the total revenue, total cost, and income target. Use the equation 200x - (130x + 420,000) = 35,000 to find the number of units that must be sold, which is 6,500.

Step-by-step explanation:

To find the profit-maximizing quantity, we need to consider the total revenue, total cost, and income target. The total revenue is calculated by multiplying the price per unit (200) by the number of units sold. The total cost is the sum of the fixed costs (420,000) and the variable costs per unit (130). The income target is subtracted from the total cost to find the profit. Using these calculations, we can set up the equation 200x - (130x + 420,000) = 35,000. Simplifying the equation gives us 70x - 420,000 = 35,000. Solving for x, we find that the number of units that must be sold is 6,500.