Question

Illinois Industries (FI) produces low cost digital cameras that sell for $150. Illinois requires a 25% return on sales. Currently feasible costs are $9,944,000 and a cost reduction of $100,250 is required to meet their target. Illinois assumes they will sell ____cameras. A. 85,000 B. 75,000 C. 87,500 D. 70,313

Answer 1

Option C,87,500 is correct

Step-by-step explanation:

The actual costs incurred =feasible costs-cost reduction

feasible costs is $9,944,000

cost reduction is $100,250

Actual costs=$9,944,000-$100,250=$9843750

The fact that required return is 25% of sales,means that 25% is added to actual costs in order to arrive at sales value, as a result sales revenue is $9843750 /0.75=$13,125.000

Sales volume=sales revenue/selling price

selling price is $150

sales volume=$13125000 /$150=87,500 units

The correct option is C