Question

Maxim manufactures a cat food product called Green Health. Maxim currently has 10,000 bags of Green Health on hand. The variable production costs per bag are $3.20 and total fixed costs are $10,000. The cat food can be sold as it is for $8.55 per bag or be processed further into Premium Green and Green Deluxe at an additional $2,600 cost. The additional processing will yield 10,000 bags of Premium Green and 3,600 bags of Green Deluxe, which can be sold for $7.55 and $5.55 per bag, respectively. If Green Health is processed further into Premium Green and Green Deluxe, the total gross profit would be:

Answer 1

Answer: $92,880

Explanation:

The Gross Profit can be calculated by simply removing the cost from the sales amount.

It is stated that the additional processing will yield 10,000 bags of Premium Green and 3,600 bags of Green Deluxe, which can be sold for $7.55 and $5.55 per bag.

Sales figure is therefore,

= (10,000 * 7.55) + (3,600 * 5.55)

= 75,500 + 19,980

= $95,480

Subtracting the cost to get,

= 95,480 - 2,600

= $92,880

The total gross profit would is $92,880.