Practice 2

Refer to the data below for a firm that produces Bluetooth loudspeakers, and then
answer the following questions.

§Sales price per loudspeaker = $250

§Variable cost per loudspeaker = $150
§Total fixed cost = $35,000
§Target profit = $40,000

(a) Calculate the break-even quantity for the manufacturer. [2 marks]

¿ Costs
BEQ =
Selling price−Average Variable Costs
BEQ= 35,000 / 250 – 150
BEQ = 350 Units
The company need to sell 350 Bluetooth speakers to break even.

(b) Calculate the number of units that the producer will have to sell to earn its
target profit. [2 marks]

Target profit quantity = (Fixed Cost + target profit) / (Price – Average Variable
Cost).
TPQ = (35,000 + 40,000) / (250 – 150)
TPQ = 75,000 / 100
TPQ = 750 units
The company needs to sell 750 Bluetooth speakers in order to achieve the $40,000
target profit.