ABC Car Company wants to manufacture a new car known as Model X, and i

Answer = C. $9,035

Profit required per vehicle \(= \frac{30,500,000}{20000} = 1525\)

Fix cost per vehicle \(= \frac{50,200,000}{20000} = 2510\)

Cost price per vehicle = 5000

Total selling price = 5000+2510+1525 = 9035

OFFICIAL SOLUTION:

(C) For this problem, we will use the formula: profit = revenue – expenses.

It may be easiest to begin labeling the variables to determine what it is we are missing.

Profit = $30,500,000
Expected quantity of Model X cars sold = 20,000
Expenses: = variable costs(quantity sold) + fixed costs = 5,000(20,000) + 50,200,000
Selling price of Model X = s
Revenue: = quantity sold × selling price = 20,000s

Now we can insert the known values into the formula: profit = revenue – expenses to solve for the answer.
30,500,000 = 20,000s – (5,000(20,000) + 50,200,000)
30,500,000 = 20,000s – (100,000,000 + 50,200,000)
30,500,000 = 20,000s – (150,200,000)
30,500,000+150,200,000 = 20,000s
180,700,000 = 20,000s
s = $9,035

Well, the way i did was somehow different. I subtracted the fixed cost per unit from the variable cost per unit right in the formula and then subtracted the overhead cost and equaled every thing to the profit.

Let the price per unit be \(x\)

\(20,000 (x-5,000) - 50,200,000=30,500,000 => 20,000X - 100,000,000 -50,200,000=30,500,00\)

We can reduce the zeros in order to make calculation easy. Therefore, i am going to drop 4 Zeros.

\(2X=10000 + 5020 + 3050 => 2X= 18070 => X = \frac{18070}{2} = 9035\)

Hi All,

The answer choices are 'spread out' enough that you can use estimation to answer this question (although you will still have to be careful to keep track of the digits involved).

Our 'goal' is to have a PROFIT of approximately $30,000,000. We know that there are FIXED COSTS of approximately $50,000,000, so with just these two values, we would need REVENUE of approximately:
$30,000,000 + $50,000,000 = $80,000,000

However, we also have to consider the manufacturing COST per vehicle ($5,000 per vehicle for 20,000 vehicles). That would be:
($5,000)(20,000) = $100,000,000

Thus, we need TOTAL REVENUE to be:
$80,000,000 + $100,000,000 = $180,000,000

To hit that total, the price that we sell each car for would have to be approximately:
$180,000,000/20,000 =
$180,000/20 =
$9,000 approximately

Final Answer:

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