Question

Now Mickey's Mousetraps wants to calculate how many dollars worth of its "Deluxe Mighty Mouse Trappers" it needs to sell in order to realize a profit objective of $60,000. The product sells for $40, it costs $10 per unit to make, and the company's fixed costs are $30,000.

a) $180,000 worth
b) $210,000 worth
c) $240,000 worth
d) $270,000 worth

Answer 1

To reach a $60,000 profit objective, Mickey's Mousetraps needs to sell $120,000 worth of "Deluxe Mighty Mouse Trappers" after covering $30,000 of fixed costs and accounting for the $30 contribution margin per unit.

Step-by-step explanation:

The student is asking about how Mickey's Mousetraps needs to calculate its sales in dollars to reach a profit objective of $60,000. Given that the "Deluxe Mighty Mouse Trappers" sell for $40, cost $10 to make, and the company has fixed costs of $30,000, we can use the profit formula (Profit = Total Revenue - Total Costs) to calculate the required sales.

First, we calculate the contribution margin per unit, which is the selling price minus the variable cost ($40 - $10 = $30). Next, we need to cover the fixed costs plus the profit objective ($30,000 + $60,000 = $90,000). To determine the number of units needed to be sold, we divide the total required contribution by the contribution margin per unit ($90,000 / $30 = 3,000 units).

Finally, to find the dollar amount of sales needed, we multiply the number of units by the selling price (3,000 units x $40 = $120,000).

This amount is not listed in the options provided, indicating that there may be an error in the question or the provided answer choices. The calculations demonstrate the importance of understanding cost structures and pricing strategies in profit planning and break-even analysis.