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CPAman78
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Posted: 17 Apr 2012 at 19:24 | IP Logged  

Hello everyone, I came across these 2 questions in Becker BEC in B2 Cost-Volume Profit analysis . I just don't understand how to get these answers. If someone can please explain, that would be great!

1) Based on potential sales of 500 units per year, a new product has estimated traceable costs of $990,000. What is the target price to obtain a 15% profit margin on sales?

a. $2,329
b. $2,277
c. $1,980
d. $1,935

Answer is: A

2) A company produces and sells two products. The first product accounts for 75% of sales and the second product accounts for the remaining 25% of sales. The first product has a selling price of $10 per unit, variable costs of $6 per unit, and allocated fixed costs of $100,000. The second product has a selling price of $25 per unit, variable costs of $13 per unit, and allocated fixed costs of $212,000. At the break-even point, what number of units of the first product will have been sold?

a.  52,000
b.  39,000
c.  25,000
d.  14,625

Answer is: B


Thanks!
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Cheerios
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Posted: 20 Apr 2012 at 11:50 | IP Logged  

1. $990,000/500 = $1980 per unit
(x-1980)/x = 0.15
x-1980 = 0.15x
-1980 = -0.85x
x = $2329.41

2. 10-6 = 4; 25-13 = 12

x/0.75 = y/0.25
0.25x = 0.75y
x = 3y

4x+12y = 100,000+212,000
4x+12y = 312,000
4(3y)+12y = 312,000
24y = 312,000
y = 13,000
x = 3(13,000) = $39,000
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