Question

A product sells for $250 per unit, and its variable costs per unit are $181. The fixed costs are $430,000. If the firm wants to earn $25,400 pretax income, how many units must be sold

Answer 1

Answer:

$6600

Explanation:

Given: Selling price= $250 per unit

          Variable cost= $181 per unit.

           Fixed cost= $430000.

           Expected Profit= $25400.

Let´s assume the number of units sold be "x".

Revenue (R) = $250\times x= \ 250x$

Cost of product (C)= $\ 181\times x+ \ 430000$

∴ Cost of product (C)= $\ 181x+ \ 430000$

Now, finding the number of unit sold.

Forming an equation for profit.

We know, Profit= $Revenue-cost$

⇒  $\ 25400= 250x- (181x+430000)$

Opening parenthesis.

⇒ $25400= 250x- 181x- 430000$

⇒ $25400= 69x- 430000$

Adding both side by 430000

⇒ $455400= 69x$

Dividing both side by 69

⇒ $x= \frac{455400}{69}$

∴ $x= 6600 units$

Hence, total number of units sold to earn $25400 is 6600 units.