Question

[When producing a 3TB portable hard drive, fixed costs are $20,000,000 regardless of sales volume. Variable costs are $25 per unit and the unit price of the portable hard drive is $50.] Julie also wants to consider the case of estimated sales volume for the target return of $20 million. Fixed costs, variable costs per unit, and price remain the same. In such a case, total revenue is ___________________ Group of answer choices

Answer 1

Answer:

$80 million

Explanation:

Return (profit) = Total revenue - total cost

Total revenue = price x quantity sold

price = $50

quantity sold = x

total revenue = $50x

Total cost = fixed cost + variable cost

fixed cost = $20,000,000

variable cost = Variable costs per unit x quantity sold

= $25x

Total cost = $20,000,000 + $25x

$20,000,000 = $50x - ($20,000,000 + $25x)

Collecting like terms and solving for x

$40,000,000 = $25x

x = 1,600,000

Total revenue =  1,600,000 x $50 = $80 million

Answer 2

The total revenue is $80 million.

We know that;

Profit = Total revenue - total cost

But

Total revenue = price x quantity sold

Total revenue = $50 * X (quantity sold)

Total revenue = $50X

Also,

Total cost = Fixed cost + Variable cost

Variable cost = Variable costs per unit x quantity sold

Variable cost  = $25x

Hence,

Total cost = $20,000,000 + $25x

$20,000,000 = $50x - ($20,000,000 + $25x)

Solving for X, we will have ;

$40,000,000 = $25x

X = 1,600,000

Recall

Total revenue = $50X

Total revenue = $50 * 1,600,000

Total revenue = $80 million

It therefore means that in such a case, the total revenue would be $80 million.

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