A product sells for $195, variable costs are $160, and fixed costs are $116,000.

Question

A product sells for $195, variable costs are $160, and fixed costs are $116,000. If the selling price can be increased by 33% with a similar increase in variable costs, how many fewer units would have to be sold to earn $340,000? (Rounded)

2,798 units.

4,812 units.

435 units.

3,233 units.

A product sells for $195, variable costs are $160, and fixed costs are $116,000. If the selling price can be increased by 33% with a similar increase in variable costs, how many fewer units would have to be sold to earn $340,000? (Rounded)

Explanation / Answer

No. of units to be sold initially.

Profit = Revenue - costs

340000 = N*(195-160) - 116000

N = 13029 units

When price and variable cost are increased by 33%

340000 = 1.33*N*(195-160) - 116000

N = 9796 units

Difference = 13029-9796 = 3233 units

Option D.

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