Business Degree Certification Practice Test

How many pillows must Dreamland sell to earn monthly gross profits of $1,000 given its cost structure?

1. 417

2. 500

3. 625

4. 875

The correct answer is: 625

To determine how many pillows Dreamland must sell to achieve a monthly gross profit of $1,000, it is essential to analyze the relationship between costs, sales price, and the desired profit. Gross profit is calculated as the difference between sales revenue and the cost of goods sold (COGS). In this scenario, if we know the selling price per pillow and the cost per pillow, we can calculate the gross profit for selling a certain number of pillows. For example, if the selling price minus the cost per pillow results in a certain profit margin, we can derive the number of pillows needed to meet the target gross profit. If the option of 625 is correct, it suggests that after accounting for the costs, selling this many pillows will yield exactly $1,000 in gross profit. Calculating backward from the desired gross profit helps confirm that at the profit margin set, 625 pillows meet this requirement precisely. Considering the other options, they don't satisfy the conditions necessary to reach the $1,000 gross profit threshold based on the provided cost structure, indicating that the calculations for those numbers wouldn't result in the expected profit under the specified prices and costs. Thus, the choice of 625 is accurate as it reflects the precise balance required to achieve