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Hello, my equation is: Target Return on Sales = Target Profit/Total Revenue Targ

ID: 2382155 • Letter: H

Question

Hello, my equation is:


Target Return on Sales = Target Profit/Total Revenue


Target Profit is: Total Revenue - Total Cost


Total Revenue is: Price x Quantity


Total Cost is: [Fixed Cost + (Variable Cost x Quantity)]



For my equation...


Target Return on Sales = 20%

Quantity = 1,250

Fixed Cost = $26,000

Variable Cost = $22


So my equation is...


Target Return on Sales = P x Q - [FC + (VC x Q)] / P x Q


0.20 = P x 1,250 - [$26,000 + ($22 x 1,250)] / P x 1,250


But my question is, how do change the problem above to solve for P?

Explanation / Answer


First solve for Target Revenue


Target Return on Sales = (Total Revenue - Total Cost)/Total Revenue =(Total Revenue - [Fixed Cost + (Variable Cost x Quantity)])/Total Revenue


=0.2 = (Target Revenue -(26,000+ 1,250*22))/Target Revenue

0.2*Target Revenue = Target Revenue - 53500

0.8*Target Revenue = 53500

Target Revenue = $66875


Total Revenue is: Price x Quantity =

66875 = P*1250

P= $53.50