Nokia has recently released its new phone the Lumia 900. Nokia has determined th

Question

Nokia has recently released its new phone the Lumia 900. Nokia has determined that their direct labor costs are $50 per unit. It will have direct materials costs of approximately $200 per unit. The company has also incurred research and development costs of approximately $100 million. And due to the extensive marketing campaign, the company will have incurred advertising costs of approximately $49 million. Nokia has no other costs associated with this line of phones. Nokia is planning to sell the phone for $450 per unit. How many units of Lumia 900 phones must Nokia sell to earn a $1 million profit?

Explanation / Answer

total fixed costs = 149 million = 149,000,000

let total number of phones to be sold = t

So,

1,000,000 = 450 x t - (250 x t + 149,000,000)

So, we have, t = 750,000 phones to be sold.

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