# Cost structure

You are currently trying to decide between two cost structures for your business: one that has a greater proportion of short-term fixed costs and another that is more heavily weighted to variable costs. Estimated revenue and cost data for each alternative are as follows: $TB@ 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 $TE@ 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?

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