Question

Manhattan Swim Club is planning for the coming year. Investors would like to earn a 10% return on the company's $36,000,000 of assets. The company primarily incurs fixed costs to maintain the swimming pools. Fixed costs are projected to be $12,500,000 for the year. About 525,000 members are expected to swim each year. Variable costs are about $12 per swimmer. Manhattan Swim Club is a price-taker and won't be able to charge more than its competitors who charge $40 for a membership. What profit will it earn in terms of dollars? (1 point)

Answer 1

Answer:

$2,200,000

Explanation:

Fixed cost = $12,500,000

Variable cost = 525,000 * $12 = 6,300,000

Total cost = Fixed cost + Variable cost = $12,500,000 + $6,300,000 = $18,800,000

Total revenue = 525,000 * $40 = $21,000,000

Profit = Total revenue - Total cost = $21,000,000 - $18,800,000 = $2,200,000

Therefore, the profit it will earn in terms of dollars is $2,200,000.