Question
You are currently trying to decide between two cost structures for your business: one that has a greater proportion of short-term fixed costs and another
You are currently trying to decide between two cost structures for your business: one that has a greater proportion of short-term fixed costs and another that is more heavily weighted to variable costs. Estimated revenue and cost data for each alternative are as follows: Cost Structure Alternative 1 Alternative 2 Selling price per unit $ 50 $ 50 Variable cost per unit 35 30 Short-term fixed costs per year 55,000 60,000 Suppose again that your profit goal for the coming year is 10% of sales. What sales volume in dollars is needed under each alternative to achieve this goal?
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