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Company Q plans to make a new product next year and sell each unit of

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Company Q plans to make a new product next year and sell each unit of [#permalink]

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Company Q plans to make a new product next year and sell each unit of this new product at a selling price of $2. The variable costs per unit in each production run are estimated to be 40% of the selling price, and the fixed costs for each production run are estimated to be $5,040. Based on these estimated costs, how many units of the new product will Company Q need to make and sell in order for their revenue to equal their total costs for each production run?

A. 4,200
B. 3,150
C. 2,520
D. 2,100
E. 1,800
[Reveal] Spoiler: OA

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Re: Company Q plans to make a new product next year and sell each unit of [#permalink]

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AbdurRakib wrote:
Company Q plans to make a new product next year and sell each unit of this new product at a selling price of $2. The variable costs per unit in each production run are estimated to be 40% of the selling price, and the fixed costs for each production run are estimated to be $5,040. Based on these estimated costs, how many units of the new product will Company Q need to make and sell in order for their revenue to equal their total costs for each production run?

A. 4,200
B. 3,150
C. 2,520
D. 2,100
E. 1,800


Let the total number of units be x.

Selling price of total x units = $2x

Total Cost price = 5040 + 40% of selling price $2x

\(5040 + \frac{40}{100} * 2x = 5040 + 0.8x\)

\(2x = 5040 + 0.8x\)

\(2x - 0.8 x =5040\)

\(1.2x = 5040\)

\(x = \frac{5040}{1.2} = $4,200\) . Answer A...

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Re: Company Q plans to make a new product next year and sell each unit of [#permalink]

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New post 17 Jun 2017, 13:24
AbdurRakib wrote:
Company Q plans to make a new product next year and sell each unit of this new product at a selling price of $2. The variable costs per unit in each production run are estimated to be 40% of the selling price, and the fixed costs for each production run are estimated to be $5,040. Based on these estimated costs, how many units of the new product will Company Q need to make and sell in order for their revenue to equal their total costs for each production run?

A. 4,200
B. 3,150
C. 2,520
D. 2,100
E. 1,800


The variable costs per unit = 0.4*2 = $0.8. So, we are left with $1.2.

To break even with $5,040 of fixed costs, $5,040/1.2 = $5,040*5/6 = 4,200 units should be made.

Answer: A.
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Re: Company Q plans to make a new product next year and sell each unit of [#permalink]

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New post 02 Jul 2017, 11:19
If company makes x units, Sp of those x units = 2x dollars

Now we are given that 40% of this Sp is variable cost, and rest must be thus fixed cost of $5040. So $5040=60% of 2x =1.2x

So x = 5040/1.2 = 4200

Hence A answer

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Company Q plans to make a new product next year and sell each unit of [#permalink]

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New post 22 Aug 2017, 07:12
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AbdurRakib wrote:
Company Q plans to make a new product next year and sell each unit of this new product at a selling price of $2. The variable costs per unit in each production run are estimated to be 40% of the selling price, and the fixed costs for each production run are estimated to be $5,040. Based on these estimated costs, how many units of the new product will Company Q need to make and sell in order for their revenue to equal their total costs for each production run?

A. 4,200
B. 3,150
C. 2,520
D. 2,100
E. 1,800


Let x = number of units Company Q must make to break even
So, 2x = REVENUE from selling x units

As for EXPENSES, we have:
Fixed cost = 5040
Variable cost = 40% of total selling price = 40% of 2x = (0.4)(2x) = 0.8x
So, TOTAL EXPENSES = 5040 + 0.8x

We want the revenue to equal the expenses.
So, we want: 2x = 5040 + 0.8x
Subtract 0.8x from both sides: 1.2x = 5040

At this point, we have several options to solve this equation. Here's one:
Take: 1.2x = 5040
Rewrite 1.2 as fraction to get: (6/5)x = 5040
Multiply both sides by 5 to get: 6x ≈ 25,000
ASIDE: Since the answer choices are reasonably spread apart, it should be fine to use approximation

Divide both sides by 6 to get: x ≈ 25,000/6
Since 24,000/6 = 4,000, we know that 25,000/6 = a number that's BIGGER THAN 4,000

Only one answer choice (A) is bigger than 4,000

Answer:
[Reveal] Spoiler:
A


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Re: Company Q plans to make a new product next year and sell each unit of [#permalink]

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New post 22 Aug 2017, 08:58
AbdurRakib wrote:
Company Q plans to make a new product next year and sell each unit of this new product at a selling price of $2. The variable costs per unit in each production run are estimated to be 40% of the selling price, and the fixed costs for each production run are estimated to be $5,040. Based on these estimated costs, how many units of the new product will Company Q need to make and sell in order for their revenue to equal their total costs for each production run?

A. 4,200
B. 3,150
C. 2,520
D. 2,100
E. 1,800


Total Cost = Fixed Cost + Variable Cost

Or, Total Cost = Fixed Cost + (Cost Price per unit x No of Units Produced)


Here, Variable Cost is 0.8

So, Total Cost = 5040 + 0.80*n (Where n = Number of Units produced)

Total Revenue = No of Units Sold x Selling Price of each unit


So, Total Revenue = 2n

Quote:
Based on these estimated costs, how many units of the new product will Company Q need to make and sell in order for their revenue to equal their total costs for each production run?


\(5040 + 0.80n = 2n\)

Or, \(n = \frac{5040}{1.20}\)

Or, \(n = 4200\)

Hence, the correct answer must be (A) 4200
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Re: Company Q plans to make a new product next year and sell each unit of [#permalink]

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New post 24 Aug 2017, 16:06
AbdurRakib wrote:
Company Q plans to make a new product next year and sell each unit of this new product at a selling price of $2. The variable costs per unit in each production run are estimated to be 40% of the selling price, and the fixed costs for each production run are estimated to be $5,040. Based on these estimated costs, how many units of the new product will Company Q need to make and sell in order for their revenue to equal their total costs for each production run?

A. 4,200
B. 3,150
C. 2,520
D. 2,100
E. 1,800


Let’s let n = the number of units sold in order to break even. The variable cost per unit is 0.4 x 2 = 0.8; thus, the variable cost for n units is 0.8n. We know that the fixed cost is $5040 and the revenue is 2n. We can create the following equation, equating total cost to total revenue:

0.8n + 5,040 = 2n

5,040 = 1.2n

4,200 = n

Answer: A
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Re: Company Q plans to make a new product next year and sell each unit of   [#permalink] 24 Aug 2017, 16:06
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