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Homework answers / question archive / Tiny Company has a product with a sales price of $7 per unit, a variable cost of $2 per unit, total fixed costs of $50,000
Tiny Company has a product with a sales price of $7 per unit, a variable cost of $2 per unit, total fixed costs of $50,000. How many units will it have to sell to achieve a desired profit of $10,000?
Group of answer choices
12,000
8,571
25,714
10,000
Answer:
steps 1st calculating Break Even point
Sales price = $7
Variable price = $2
Contribution per unit = Sale price - Variable Price
= $(7-2)
= $5
BEP units = Fixed Cost / (Sales price p.u - Variable price p.u)
= 50000/5
= 10000 units
Target profit calculation
Sales (in units) = (REQURIED PROFIT + FIXED COSTS) / Contribution p.u
= (10000 + 50000 ) / 5
Answer = 12000 units
2nd methd
Hit and trial method (when u have options)
| 12000 | 8571 | 25714 | 10000 | ||
| Sales price | 7 | 84000 | 59997 | 179998 | 70000 |
| Variable price | 2 | 24000 | 17142 | 51428 | 20000 |
| Contribution | 5 | 60000 | 42855 | 128570 | 50000 |
| Fixed cost | 50000 | 50000 | 50000 | 50000 | 50000 |
| Profit | 10000 | -7145 | 78570 | 0 |
