JSP produces printers. The total variable production cost of each printer amounts to £35 and each printer sells for £60. In addition to the variable production cost, a royalty payment of £1 is paid to the special chip designer for each printer sold. JSP's fixed costs total up to £480,000 per annum. JSP currently sells 25,000 printers every year. A new managing director has been appointed and she has set a target profit of £216,000 for JSP in the coming financial year. How many printers will JSP have to sell in total to achieve a target profit of £216,000?

Question

Quizplus · Accepted Answer

To achieve the target profit, calculate the contribution per printer: Selling price (£60) - Variable cost (£35) - Royalty (£1) = £24. Then, use the formula: (Fixed Costs + Target Profit) / Contribution per printer = (480,000 + 216,000) / 24 = 29,000 printers.

JSP Produces Printers