Question

For the past few years your company has sold 50,000 units of goods each year at a selling price of $25/unit. Fixed production costs were $300,000 and variable costs were $8 per unit. The Marketing Department advises you they believe sales will increase to 68,000 units next year due to a new advertising campaign. Assuming they are correct, answer the following;
a. What will be your firm's cost per unit next year?
B. What will be your firm's profit next year?

Answer 1

Answer:

Instructions are listed below.

Explanation:

Giving the following information:

For the past few years, your company has sold 50,000 units of goods each year at a selling price of $25/unit. Fixed production costs were $300,000 and variable costs were $8 per unit. The Marketing Department advises you they believe sales will increase to 68,000 units next year.

A) Fixed costs= 300,000

Variable costs= 8*68,000= 544,000

Total= 844,000

Cost per unit= 844,000/68,000= 12.41

B) Profit= (25*68000) - 844,000= $856,000