Hello, my equation is: Target Return on Sales = Target Profit/Total Revenue Targ
ID: 2382155 • Letter: H
Question
Hello, my equation is:
Target Return on Sales = Target Profit/Total Revenue
Target Profit is: Total Revenue - Total Cost
Total Revenue is: Price x Quantity
Total Cost is: [Fixed Cost + (Variable Cost x Quantity)]
For my equation...
Target Return on Sales = 20%
Quantity = 1,250
Fixed Cost = $26,000
Variable Cost = $22
So my equation is...
Target Return on Sales = P x Q - [FC + (VC x Q)] / P x Q
0.20 = P x 1,250 - [$26,000 + ($22 x 1,250)] / P x 1,250
But my question is, how do change the problem above to solve for P?
Explanation / Answer
First solve for Target Revenue
Target Return on Sales = (Total Revenue - Total Cost)/Total Revenue =(Total Revenue - [Fixed Cost + (Variable Cost x Quantity)])/Total Revenue
=0.2 = (Target Revenue -(26,000+ 1,250*22))/Target Revenue
0.2*Target Revenue = Target Revenue - 53500
0.8*Target Revenue = 53500
Target Revenue = $66875
Total Revenue is: Price x Quantity =
66875 = P*1250
P= $53.50
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