The average selling price is $.60 per unit,the average variable cost is $.36 per unit,and the total fixed costs are $1,500.If operating profits of $900 are desired,a sales volume of 2,500 units is necessary.

Question

Quizplus · Accepted Answer

To determine whether the statement is true or false, we can use the following equation to calculate the required sales volume for a desired operating profit:

Required sales volume = (Fixed costs + Desired operating profit) / (Selling price - Variable cost per unit)

In this case, plugging in the values given in the statement, we get:

Required sales volume = (1500 + 900) / (0.60 - 0.36) = 3750

This is higher than the given sales volume of 2500 units, so the statement is false. A sales volume of 3750 units would be necessary to achieve an operating profit of $900.

The Average Selling Price Is