Question

Palms, Inc. wants to sell enough palm trees to earn a profit of $20,000. If the unit sales price is $40, unit variable cost is $22, and total fixed costs are $120,400, how many trees must be sold to earn a profit of $20,000?

Answer 1

7.800 trees.

Step-by-step explanation:

The basic profict equation is Profit = sales - costs.

Profit = sales - (variable costs + fixed costs)

Profit + fixed costs = sales - variable costs

Profit + fixed costs = n° units * (unit selling price - unit variable costs)

In this case, the equation is:

Profit + fixed costs = n° units * (unit selling price - unit variable costs)

$20.000 + $120.400 = n° units * ($40 - $22)

$140.400 = n° units * $18

$140.400 / $18 = n° units

7.800 = n° units