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Artis Sales has two store locations. Store A has fixed costs of $125,000 per month and a variable cost ratio of 60%. Store B has fixed costs of $200,000 per month and a variable cost ratio of 30%. At what sales volume would the two stores have equal profits or losses

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ayokenny2001

Answer:

See below

Explanation:

Given the above information, break even sales is computed as

0.60 VCR - $120,000 = 0.30 VCR - $200,000

0.60 VCR - 0.30 VCR = $200,000 - $120,000

0.30 VCR = $80,000

VCR = $266,667

Therefore, at the sales volume of $266,667 the two stores would have equal profit or losses

chilljain33

Artis sales will achieve equal profits or losses at the level of $266,667 if the conditions given with variable costs of 30% and 60% are met respectively by both the stores at fixed costs $125,000 and $200,000.

Artis sales' equilibrium points of profits or losses can be calculated by using the formula of finding the equilibrium variable capital ratios of both its store locations.

  • The variable costs ratio of store 1 is 60% over fixed costs of $125,000 and that of the 2nd store is 30% over fixed costs of $200,000 are the information given. Putting the values in the formula that,

[tex]\rm Percentage\ Ratio\ Of\ Fixed\ Costs\ For\ Store\ 1- Fixed\ Costs\ For\ Store\ 1= Percentage\ Ratio\ Of\ Fixed\ Costs\ For\ Store\ 2- Fixed\ Costs\ For\ Store\ 2[/tex]

  • Putting the given values and considering the equilibrium point as x

[tex]0.60x-125000= 0.30x -200000[/tex]

[tex]0.60x - 0.30x = 200000-125000[/tex]

We get

[tex]x=\dfrac{80000}{0.30}[/tex]

[tex]x= 266667[/tex]

  • Therefore, the value of equilibrium for both the stores will be at $266,666.

Hence, The point at equal profits or losses for both the store locations of Artis Sales will be at $266,667.

To know more about variable costs ratio, click the link below

https://brainly.com/question/6125659

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