Match Year-2 profit to Year-1

Q: Match Year-2 profit to Year-1

This question evaluates unit economics, basic profit modeling, and algebraic manipulation to relate price, variable cost, fixed costs, and sales volume.

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Question

Target Profit Volume Across Two Years

Context

You sell only classic burgers. Year 1 has negligible fixed costs; Year 2 introduces new fixed costs. The unit economics (price and variable cost per unit) stay the same in Year 2. Find how many units you must sell in Year 2 to match Year 1's total (absolute) profit.

Given

Year 1:
- Price per unit = $4
- Variable cost per unit = $1
- Volume = 231 million units
- Fixed costs ≈ 0
Year 2:
- Same price and unit cost as Year 1
- Fixed costs:
  - Base fixed cost = $375 million per year
  - Vegan program training = $60 million per year
  - Supplier retainer = $2.25 million per month

Task

Assuming you still sell only classic burgers in Year 2, how many total units must you sell in Year 2 to match Year 1's absolute profit? Show the equation and the solution.

Match Year-2 profit to Year-1

Target Profit Volume Across Two Years

Context

Given

Task

Solution

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Match Year-2 profit to Year-1

Overview

Target Profit Volume Across Two Years

Context

Given

Task

Solution

Comments (0)