Houston Company produces a product that sells for 175 per un

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.

Solution

:Let the sales volume in units in order to earn the desired profit = x units.

we know , Sales - ( variable cost + fixed cost) = Desired profit

Thus we can form the following eqaution :

$175 x - ( $50 x + $200,000) = $80,000

$125 x =$280,000

x = 2,240 units.

in dollars = Sales in units * selling price per unit = 2,240 units * $175 = $392,000

Answer : Required sales volume in units = 2,240 units ; Required sales volume in dollars = $392,000