A group of venture investors is considering putting money into Lemma Books, which wants to produce a new reader for electronic books. The variable cost per unit is estimated at $250, the sales price would be set at twice the VC/unit, fixed costs are estimated at $750,000, and the investors will put up the funds if the project is likely to have an operating income of $500,000 or more. What sales volume would be required in order to meet this profit goal?
A) 4,513
B) 4,750
C) 5,000
D) 5,250
E) 5,513

Question

Quizplus · Accepted Answer

To find the required sales volume, use the formula: Sales Volume = (Fixed Costs + Desired Operating Income) / (Sales Price per Unit - Variable Cost per Unit). Here, Sales Price per Unit = 2 * $250 = $500. So, Sales Volume = ($750,000 + $500,000) / ($500 - $250) = 5,000 units.

A Group of Venture Investors Is Considering Putting Money into Lemma