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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	$ 100	$ 100
Variable cost per unit	75	70
Short-term fixed costs per year	60,000	65,000

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 10% of sales (i.e., operating profit/sales = 10%). 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 10% of sales. What sales volume in dollars is needed under each alternative to achieve this goal?

Requirement 1

What sales volume, in units, is needed for the total costs in each cost-structure alternative to be the same?

	Sales volume (in units)

Requirement 2

Suppose your profit goal for the coming year is 10% of sales (i.e., operating profit / sales = 10%). What sales level in units is needed under each alternative to achieve this goal?

	Alternative 1 Alternative 2 Required sales volume (in units)

Requirement 3

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?

	Alternative 1 Alternative 2 Required sales volume (in dollars)

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