Question

Pure Water Products produces two types of water filters. One attaches to the faucet and cleans all water that passes through the faucet. The other is a pitcher-filter that only purifies water meant for drinking. Revenue and cost information for each product appears below: the unit that attaches to the faucet is sold for $70 and has variable costs of $45 . the pitcher-filter sells for $80 and has variable costs of $30 e fixed costs total $442,000 . Pure Water sells 4 faucet models for every 3 pitcher-filters sold Calculate the number of units of the faucet-model that must be sold in order for Pure Water Products to carn a target profit of $212,000.

Answer 1

Total Target Contribution = Target Profit+Total Fixed Cost

= $212,000+$442,000 = $654,000

Contribution per unit of faucet = Sale price - Variable cost per unit

= $70 - $45 = $25 per unit

Contribution per unit of pitcher filter = Sale price - Variable cost per unit

= $80 - $30 = $50 per unit

Total Target Contribution = Total contribution from faucet+Total contribution from pitcher fiter

$654,000 = (4x*$25)+(3x*$50)

$654,000 = $100x+$150x = $250x

x = $654,000/$250 = 2,616

Total units of Faucet to be sold = 4*2,616 = 10,464 units