Question

Faulk Industries (FI) produces low cost digital cameras that sell for $175. FI 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. FI assumes they will sell ____cameras. A. 70,313 B. 56,823 C. 75,000 D. 85,000

Answer 1

Answer:

option (C) 75,000

Explanation:

Data provided in the question:

Selling cost of digital cameras = $175

Required return on sales = 25%

feasible costs = $9,944,000

cost reduction = $100,250

Now,

cost of camera  = $175 × (1 - Desired profit )

or

cost of camera = $175 × (1 - 0.25)

or

cost of camera = $131.25

Now,

Net cost of cameras sold = cost of camera × Number of cameras FI sell

$9,944,000 - $100,250 = $131.25 × Number of cameras FI sell

or

$9,843,750 = $131.25 × Number of cameras FI sell

or

Number of cameras FI sell = 75,000

Hence,

the answer is option (C) 75,000