Question

Company A has fixed expenses of $100,000 and variable expenses of $50 per unit. Company B has fixed expenses of $200,000 and variable expenses of $25 per unit. The volume of unit sales necessary to produce exactly the same operating income for Company A and Company B is:

Answer 1

To find the volume of unit sales necessary to produce the same operating income for Company A and Company B, set their operating incomes equal to each other and solve for the volume of unit sales. The volume of unit sales necessary is 4,000 units.

Step-by-step explanation:

To find the volume of unit sales necessary to produce the same operating income for Company A and Company B, we need to set their operating incomes equal to each other. Let's assume the volume of unit sales for both companies is 'x' units.

For Company A, the total costs (fixed expenses + variable expenses) would be: $100,000 + ($50 * x) = $100,000 + $50x. For Company B, the total costs would be: $200,000 + ($25 * x) = $200,000 + $25x.

Setting the two expressions for total costs equal to each other, we have: $100,000 + $50x = $200,000 + $25x. Simplifying the equation, we get: $50x - $25x = $200,000 - $100,000. This gives us: $25x = $100,000. Dividing both sides by $25, we find: x = 4,000 units.

Therefore, the volume of unit sales necessary to produce the same operating income for Company A and Company B is 4,000 units.

Answer 2

To find the volume of unit sales necessary for Company A and Company B to have the same operating income, we set their total costs equal to each other. The volume of unit sales necessary is 4,000 units.

Step-by-step explanation:

To find the volume of unit sales necessary for Company A and Company B to produce the same operating income, we need to set their total costs equal to each other. The total cost for Company A is calculated as $100,000 (fixed expenses) plus $50 (variable expenses per unit) multiplied by the number of units. The total cost for Company B is calculated as $200,000 (fixed expenses) plus $25 (variable expenses per unit) multiplied by the number of units.

Let's represent the number of units as 'x', and set the total costs equal to each other: 100,000 + 50x = 200,000 + 25x. Solving this equation will give us the volume of unit sales necessary for both companies to have the same operating income.

Example:

100,000 + 50x = 200,000 + 25x

25x = 100,000

x = 4,000

Therefore, the volume of unit sales necessary for both companies to produce the same operating income is 4,000 units.