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Greg’s Goosebumps produces Halloween items. Greg’s production costs co

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Greg’s Goosebumps produces Halloween items. Greg’s production costs co  [#permalink]

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New post 30 May 2017, 10:40
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Difficulty:

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Question Stats:

75% (01:18) correct 25% (02:08) wrong based on 114 sessions

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Greg’s Goosebumps produces Halloween items. Greg’s production costs consist of annual fixed costs totaling $120,000 and variable costs averaging $4 per item. If Greg’s selling price per item is $20, how many items must he produce and sell to earn an annual profit of $200,000?

(A) 20,000
(B) 15,000
(C) 3,333
(D) 5,000
(E) 1,333

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Re: Greg’s Goosebumps produces Halloween items. Greg’s production costs co  [#permalink]

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New post 30 May 2017, 11:08
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1
cost price + profit = selling price

120,000 + 4n + 200,000 = 20n

16n = 320,000
n = 20,000 (A)
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Re: Greg’s Goosebumps produces Halloween items. Greg’s production costs co  [#permalink]

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New post 30 May 2017, 11:11
Let x be the items being produced
CP = 4x
SP = 20x
Profit = 16x
Since the fixed cost of 120000 needs be recovered along with making a 200000$ profit, the total profit that needs to be made is 320000$

16x = 320000
x = 20000 items(Option A)
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Greg’s Goosebumps produces Halloween items. Greg’s production costs co  [#permalink]

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New post 01 Jun 2017, 08:34
Kritesh wrote:
Greg’s Goosebumps produces Halloween items. Greg’s production costs consist of annual fixed costs totaling $120,000 and variable costs averaging $4 per item. If Greg’s selling price per item is $20, how many items must he produce and sell to earn an annual profit of $200,000?

(A) 20,000
(B) 15,000
(C) 3,333
(D) 5,000
(E) 1,333


I couldn't "see" the equation within 20 seconds, though I knew I was close. I decided to test values where x = the number of items to be produced and sold.

Option C looks less than fun.

1. Start with D, where x = 5000

Total cost (TC): $120,000 + ($4)*(5,000) = $140,000

Total revenue (TR): ($20)*(5,000) = $100,000

Gross profit = (TR - TC) = -$40,000 ... So x = 5,000 is much too small.

2. Try A, x = 20,000

TC: $120,000 + ($4)*(20,000) = $200,000

TR: ($20)*(20,000) =$400,000

$400,000 - $200,000 = $200,000 profit. Correct.

Answer A
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Re: Greg’s Goosebumps produces Halloween items. Greg’s production costs co  [#permalink]

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New post 28 Oct 2018, 13:21

Solution



Given:
    • Greg’s production costs includes of annual fixed costs and variable costs.
    • Annual fixed costs = $120,000
    • Variable costs= $4 per item.
    • Greg’s selling price per item = $20

To find:
    • The number of items, Greg’s must produce and sell to earn an annual profit of $200,000

Approach and Working
    • Production cost= Fixed cost+ Variable cost
      o Product cost= 120,000+ 4*n, where n is the number of item produced.

    • Selling price of n items= 20*n
    • Profit = 200,000
    • 20*n- 120,000+ 4*n = 200,000
    • 16n= 320,000
    • N= 20,000

Correct answer: Option A
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Re: Greg’s Goosebumps produces Halloween items. Greg’s production costs co &nbs [#permalink] 28 Oct 2018, 13:21
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