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Sarah is the marketing manager for Utter Mayhem, the hottest new game among teenage gamers
Sarah is the marketing manager for Utter Mayhem, the hottest new game among teenage gamers. In order to get her bonus she has to sell a lot of games in the Christmas launch, as Utter Mayhem was a bit pricy to make. She has the following information.
FC = $1,200,000
Price = $55
Unit variable cost = $28
If Breakeven Even Volume (BEV) = fixed costs / (price-variable cost) then how many games does Sarah need to sell to make a profit of $500,000.
Make sure you pay attention to the PROFIT Sarah wants to make.
Question 18 options:
71, 664
64, 873
62, 962
61, 221
66, 098
Expert Solution
Answer:62,963
Step-by-step explanation
Given that,
Fixed Cost = $1,200,000
Price = $55
Unit Variable cost = $28 => Total variable cost = $28 x Quantity
Let the quantity of games to be sold to make $500,000 profit be 'Q'
Total Revenue = Price x Quantity = $55Q
Total Cost = Fixed Cost + Total Variable Cost = $1,200,000 + $28Q
Profit = $55Q - ($1,200,000 + $28Q)
=> 500,000 = 55Q-1,200,000-28Q
=> 500,000 = 27Q - 1,200,000
=> Q = (500,000+1,200,000)/27 = 62,962.96 = 62,963 units (approx)
Number of games Sarah needs to sell to make a profit of $500,000 = 62,963
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