Houston Company produces a product that sells for $175 per unit and has variable costs of $50 per unit. Houston's annual fixed costs are $200,000, and the company wishes to earn a profit of $80,000.Required:Use the equation method to determine the sales volume in units and dollars required to earn the desired profit.
What will be an ideal response?
Selling price × Number of units = Variable cost × Number of units + Fixed costs + Desired profit; let Number of units = x
$175x = $50x + $200,000 + $80,000
$125x = $280,000
x = Number of units sold = 2,240
Sales in dollars = 2,240 × $175 = $392,000
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