Question

1. Atlas Corporation sells 100 bicycles during a month. The contribution margin per bicycle is $200. The monthly fixed expenses are $8,000. Compute the profit from the sale of 100 bicycles ________.
a. $12,000
b. $10,000
c. $20,000
d. $8,000

2. Atlas Corporation sells 100 bicycles during a month at a price of $500 per unit. The variable expenses amount to $300 per bicycle. How much does profit increase if it sells one more bicycle?
a. $500
b. $300
c. $200
d. $20,200

Answer 1

Answer:

The answers are:

1. A) $12,000
2. C) $200

Explanation:

1) To calculate the profit of Atlas corporation we use the following formula:

Profit = (contribution margin x units sold) - fixed expenses =

Profit = $20,000 - $8,000 = $12,000

2) We must calculate the contribution margin of one bicycle using the following formula:

contribution margin (1 bike) = selling price p/unit - variable expenses p/unit =

contribution margin (1 bike) = $500 - $300 = $200