Cost Management 6th Edition by Edward Blocher,David Stout ,Paul Juras,Gary Cokins

Exercise 55

Profit Planning and Sensitivity Analysis You are currently trying to decide between two cost structures for your business, one that has a greater proportion of short-term fixed costs, the other that is more heavily weighted to variable costs. Estimated revenue and cost data for each alternative is as follows:
Required
1. What sales volume, in units, is needed for the total costs in each cost-structure alternative to be the same
2. Suppose your profit goal for the coming year is 5 percent on sales (i.e., operating profit/sales = 5%). What sales level in units is needed under each alternative to achieve this goal
3. Suppose again that your profit goal for the coming year is 5 percent on sales. What sales volume in dollars is needed under each alternative to achieve this goal