Question

An entity has decided to focus strictly on producing and selling one type of teddy bear. For the upcoming year, the entity hopes to make a 25% profit on sales. Fixed costs are set at $51,000, and variable costs are $9.50 per unit. If teddy bears are sold at $15 each, how many bears must be sold to meet the profit goal?

Answer 1

Answer:

29,143

Explanation:

Profit target = 25% on sales

Fixed cost = $51,000

Variable cost = $9.50 per unit

Sales price per unit = $15

To achieve profit target, let the number of units sold be y

Total sales = 15y

Total variable cost = 9.5y

Profit = 0.25 × 15y

         = 3.75y

Sales - Cost = profit

15y - (51000 + 9.5y) = 3.75y

15y - 9.5y - 3.75y = 51000

1.75y = 51000

y = 51000/1.75

y = 29143

29,143 bears must be sold to meet the profit goal.