Diego Motors is a small car dealership. On average, it sells a car for $ 30,000, which it purchases from the manufacturer for $ 26,000. Each month, Diego Motors pays $ 55,000 in rent and utilities and $ 75,000 for salespeople’s salaries. In addition to their salaries, salespeople are paid a commission of $ 800 for each car they sell. Diego Motors also spends $ 14,000 each month for local advertisements. Its tax rate is 40%.

1. How many cars must Diego Motors sell each month to break even?
2. Diego Motors has a target monthly net income of $ 59,520. What is its target monthly operating income? How many cars must the company sell each month to reach the target monthly net income of $ 59,520?

  • CreatedJanuary 15, 2015
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