contestada

M and M, Inc. produces a product that has a variable cost of $3.80 per unit. The company's fixed costs are $44,800. The product is sold for $7 per unit and the company desires to earn a target profit of $12,800. What is the amount of sales that will be necessary to earn the desired profit?

Respuesta :

Answer:

the required sales are $126,000

Step-by-step explanation:

Since the total cost C is equal to the fixed costs plus the variable costs

C= fixed costs + variable costs = $44,800 + $3.80/unit * Q

where Q= quantity of units sold

the sales S will be

S= unit price * quantity sold = $7/unit * Q

finally since the profit is equal to the sales minus the total costs

P = S - C

$12,800 =  $7/unit * Q  - ($44,800 + $3.80/unit * Q )

$12,800 + $44,800 = $7/unit * Q - $3.80/unit * Q = $3.2/ unit  * Q

Q = $57,600 / $3.2/ unit = 18000 units

therefore the required sales are

S=$7/unit * Q = $7/unit * 18000 units = $126,000

therefore the required sales are $126,000