Question

Spark Co. buys cordless phones for $125 each and sells them for $200 each. Spark pays a sales commission of $25 per phone sold and monthly fixed costs are $3,000. Assuming Spark desired a profit of 10% of sales, how many units must Spark sell?

A.600
B.400
C.200
D.100

Answer 1

To calculate the number of units Spark must sell to achieve a 10% profit on sales, we need to consider the profit margin, costs, and fixed costs. The profit per phone is $50. By dividing the sum of fixed costs and desired profit by the profit per phone, we find that Spark must sell 60 units.

Step-by-step explanation:

To calculate the number of units Spark must sell, we need to consider the profit margin and the costs involved. The desired profit margin is 10% of sales and the selling price is $200 per phone. The cost price is $125 per phone and the sales commission is $25 per phone sold. The monthly fixed costs are $3,000.

Let's calculate the profit per phone: Selling price - Cost price - Commission = $200 - $125 - $25 = $50.

Now, let's calculate the number of units Spark needs to sell to achieve the desired profit: (Fixed costs + Desired profit) ÷ Profit per phone = ($3,000 + 10% of sales) ÷ $50 = 60 units.

Therefore, Spark must sell 60 units to achieve a profit of 10% of sales.