Question # 1

Barhoms Cellular (BC) is a distributor and sells phones for $1250. BC gets the phones for $900 each. BC pays the sales staff a commission of 10% for each phone sold. BCs fixed selling, administrative & other fixed costs total $36,900 per year.

Required:

1. How many phones BC needs to sell to achieve a target profit of $51,000 a year?

2. BC is considering selling another type of phone. The new phone has a cost of $1,400 and will be sold for $2,000 each. The sales commission policy will apply for the new phone too. Barhom expects that out of every four phones he sells one will be from the new one and three from the old one. How many phones of each he needs to sell to breakeven.