I was wondering if anyone knew of a place where I can get some of the explanations for the newly released AICPA questions. There are a few I am struggling with, one of them being:
Spark Co. buys phones for $125 each and sells them for $200 each. Spark pays a sales commission of $25 per phone sold and monthly fixed costs are $3,000. Assuming Spark desired a profit of 10% on sales, how many units must Spark sell? a) 600 b) 400 c) 200 d) 100
I know the formula for a desired profit is Total Fixed Cost+Desired Profit/CM per unit. So I thought it would be (3000 total fixed Cost+(200*.10 profit on the selling price of the item))/(Not sure if it would be SP200-25 Commission which is the Variable cost but do you also subtract the $125?). I know this is long but if anyone can help I would greatly appreciate it.
I'm reviewing the same released questions an I can't quite figure out how they are coming up with $27,400 for the following question. Can someone please provide some insight?
Smith Legal Services has offered to represent a plaintiff in a lawsuit for a retainer of
$20,000 plus 40% of any award over $20,000. Smith expects to incur out-of-pocket expenditures
of $15,000 in litigating the suit. Possible court awards with their associated probabilities are:
What is the expected value to Smith of the lawsuit?