Question

Sugar corp has a selling price of $20, variable costs of $12 per unit, and fixed costs of $25,000. maple expects profit of $300,000 at its anticipated level of production. if sugar sells 5,000 units more than expected, how much higher will its profits be?

Answer 1

So we first need to find the profit per unit, which means we need to find the number of units sold

profit = (sales price* quantity) - variable cost*quantity - fixed costs

plug in what we know

300,000 = (20q) - 12q-25,000

275,000 = 8q

q= 34,375 units produced. Then take profit/units = 300,000/34375 = 8.73 profit per unit

Now if we sell 5,000 more units, we would have 8.73*5000 = 43,636.36 additional profit