Cost structure
You are currently trying to decide between two cost structures for your business: one with a greater proportion of short-term fixed costs and another more heavily weighted to variable costs. Estimated revenue and cost data for each alternative are as follows:
Required:
1. What sales volume, in units, is needed for the total costs in each cost-structure alternative to be the same?
2. Suppose your profit goal for the coming year is 5% of sales (i. E., operating profit/sales = 5%). What is the sales level in units needed under each alternative to achieve this goal?
3. Suppose again that your profit goal for the coming year is 5% of sales. What is sales volume in dollars needed under each alternative to achieve this goal?
Cost Structure: | Selling price per unit | Variable cost per unit | Short-term fixed costs per year |
---|---|---|---|
Alternative 1 | 100 | 75 | 60000 |
Alternative 2 | 100 | 70 | 65000 |
Required:
1. What sales volume, in units, is needed for the total costs in each cost-structure alternative to be the same?
2. Suppose your profit goal for the coming year is 5% of sales (i. E., operating profit/sales = 5%). What is the sales level in units needed under each alternative to achieve this goal?
3. Suppose again that your profit goal for the coming year is 5% of sales. What is sales volume in dollars needed under each alternative to achieve this goal?
Correct answer:
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Do you have a linear equation or system of equations and looking for its solution? Or do you have a quadratic equation?
Do you want to round the number?
Do you want to convert time units like minutes to seconds?
You need to know the following knowledge to solve this word math problem:
- algebra
- equation
- expression of a variable from the formula
- arithmetic
- rounding
- basic functions
- percentages
- reason
Units of physical quantities:
Grade of the word problem:
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