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:______.

Answer 1

Fixed costs are $3,200 per month. The number of bottles that must be sold each month to earn the target profit is 4,800

Answer 2

4,800 bottles

Step-by-step explanation:

The formula to compute the number of bottles sold is shown below:

= (Fixed cost + target profit) ÷ (Contribution margin per unit)

where,

Contribution margin per unit = Selling price per unit - Variable expense per unit

= $15 - $13.50

= $1.50

So, the number of bottles sold equal to

= ($3,200 + $4,000) ÷ ($1.50)

= 4,800 bottles