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You are currently trying to decide between two cost structures for your business: one that...

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Accounting

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 2520
Short-term fixed costs per year 70,00075,000
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?

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