Sportstuff, Inc. is investigating the feasibility of adding a new skateboard to its line-up of products. The marketing department believes that 10,000 units can be sold at $90 each. Sportstuff requires a 25% profit margin (i.e. cost is 75% of selling price) on all products.
To achieve its goal, Sportstuff must keep total costs equal to or below:
A) $225,000
B) $675,000
C) $506,250
D) $900,000

Question

Quizplus · Accepted Answer

To achieve a 25% profit margin, the cost must be 75% of the selling price. The total revenue from selling 10,000 units at $90 each is $900,000. Therefore, the total cost must be 75% of $900,000, which is $675,000.