You are currently trying to decide between two cost
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
What sales volume, in units, is needed for the total costs in each cost-structure alternative to be the same?
Suppose your profit goal for the coming year is 5% of sales (i.e., operating profit ÷ sales = 5%). What sales level in units is needed under each alternative to achieve this goal?
Suppose again that your profit goal for the coming year is 5% of sales. What sales volume in dollars is needed under each alternative to achieve this goal?
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