Question

"Paula's Perfumes has a target profit of $4,000 per month. Perfume sells for $15.00 per bottle and variable costs are $13.50 per bottle. Fixed costs are $3,200 per month. The number of bottles that must be sold each month to earn the target profit is ______.

A.4,800
B.267
C.534
D.7,200"

Answer 1

To earn a target profit of $4,000 per month, approximately 2,667 bottles of perfume must be sold each month.

Step-by-step explanation:

To find the number of bottles that must be sold each month to earn the target profit, we need to calculate the contribution margin per bottle which is the selling price minus the variable cost per bottle.

The contribution margin per bottle is $15.00 - $13.50 = $1.50.

To cover the fixed costs and earn a profit of $4,000 per month, we need to divide the target profit by the contribution margin per bottle: $4,000 ÷ $1.50 = 2,666.67.

Rounding up to the nearest whole number, the number of bottles that must be sold each month to earn the target profit is approximately 2,667 bottles (B).