Question

Assume that a company sells customized sweatshirts for $15 per unit. It pays a sales commission of $5 per unit sold. The company must buy sweatshirts from its supplier in batches of 100 units at an average unit cost of $7 per sweatshirt. The number of sweatshirts the company would need to sell to earn a target profit of $1,710 is closest to:

Answer 1

The company would need to sell 570 sweatshirts to earn a target profit of $1,710.

Step-by-step explanation:

To find the number of sweatshirts the company would need to sell to earn a target profit of $1,710, we need to calculate the breakeven point.

The breakeven point is the quantity of sweatshirts the company needs to sell in order for the total revenue to equal the total cost.

The total cost per unit is the sum of the average unit cost of $7 and the sales commission of $5 per unit, which is $12. The breakeven point is given by the equation:

Breakeven point = Fixed costs / (Selling price per unit - Total cost per unit)

Plugging in the values, we get:

Breakeven point = $1,710 / ($15 - $12) = 570 units

Therefore, the closest number of sweatshirts the company would need to sell to earn a target profit of $1,710 is 570 units.