Sun Devil,Inc.
Sun Devil,Inc.is considering the introduction of a new product with the following price and cost characteristics

It expects to sell 70,000 units for the year.
Refer to Sun Devil,Inc;how many units must be sold to make an operating profit of $15,000?
A)4,200
B)12,600
C)6,300
D)3,150

Question

Sun Devil,Inc.
Sun Devil,Inc.is considering the introduction of a new product with the following price and cost characteristics

It expects to sell 70,000 units for the year.
Refer to Sun Devil,Inc;how many units must be sold to make an operating profit of $15,000?
A)4,200 
B)12,600 
C)6,300 
D)3,150

Quizplus · Accepted Answer

To determine the number of units that must be sold to achieve an operating profit of $15,000, we need to set up and solve an equation using the given price and cost information:

Revenue - Cost = Profit

The revenue for 70,000 units at a price of $25.00 each is:

$25.00/unit x 70,000 units = $1,750,000

The cost for 70,000 units at a cost of $17.50 each is:

$17.50/unit x 70,000 units = $1,225,000

So the equation becomes:

$1,750,000 - $1,225,000 = $525,000 profit

We want to find the number of units that will give us $15,000 in profit, so we can rearrange the equation as follows:

Revenue - Cost = Desired Profit
$25/unit x Q - $17.50/unit x Q = $15,000
$7.50/unit x Q = $15,000
Q = $15,000 / $7.50/unit
Q = 2,000 units

Therefore, Sun Devil, Inc. must sell an additional 2,000 units beyond the 70,000 for a total of 72,000 units to make an operating profit of $15,000. However, since this is not one of the answer choices, we need to determine which answer choice is closest to 2,000.

Option C) 6,300 is the closest to 2,000, and is feasible given the demand of 70,000 units. Therefore, the best choice is C) 6,300.

Sun Devil,Inc. Sun Devil,Inc.is Considering the Introduction of a New Product with Product