Saved Metet, Inc. has fed costs of $257,000, sales price of $54, and variable cost of $32 per unit How many units must be sold to earn profit of $29,000? 5 Mpr Choicr 1000 20.500 2.00

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
icon
Concept explainers
Topic Video
Question
### Business Profitability Calculation

#### Problem Statement:
Merlot, Inc. has fixed costs of $257,000, a sales price of $54 per unit, and a variable cost of $32 per unit. How many units must be sold to earn a profit of $29,000?

#### Multiple Choice Options:
- 3,000
- 20,500
- 13,000
- 11,500

### Explanation:

To solve this problem, you'll need to calculate the break-even point first and then determine the number of additional units required to achieve the desired profit.

**Break-even point formula:**
\[ \text{Break-even point (units)} = \frac{\text{Fixed Costs}}{\text{Sales Price per Unit} - \text{Variable Cost per Unit}} \]

**Profit target formula:**
\[ \text{Profit target (units)} = \text{Break-even point (units)} + \frac{\text{Desired Profit}}{\text{Sales Price per Unit} - \text{Variable Cost per Unit}} \]

Utilize these formulas to determine the correct number of units from the provided options.
Transcribed Image Text:### Business Profitability Calculation #### Problem Statement: Merlot, Inc. has fixed costs of $257,000, a sales price of $54 per unit, and a variable cost of $32 per unit. How many units must be sold to earn a profit of $29,000? #### Multiple Choice Options: - 3,000 - 20,500 - 13,000 - 11,500 ### Explanation: To solve this problem, you'll need to calculate the break-even point first and then determine the number of additional units required to achieve the desired profit. **Break-even point formula:** \[ \text{Break-even point (units)} = \frac{\text{Fixed Costs}}{\text{Sales Price per Unit} - \text{Variable Cost per Unit}} \] **Profit target formula:** \[ \text{Profit target (units)} = \text{Break-even point (units)} + \frac{\text{Desired Profit}}{\text{Sales Price per Unit} - \text{Variable Cost per Unit}} \] Utilize these formulas to determine the correct number of units from the provided options.
Expert Solution
steps

Step by step

Solved in 2 steps

Blurred answer
Knowledge Booster
Costing Systems
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education