Question
In: Accounting
Calico Joe Fabrics sells a single product. The company estimates total fixed costs at $360,000 with...
Calico Joe Fabrics sells a single product. The company estimates
total fixed costs at $360,000 with demand and unit variable costs
at various activity levels as follows:
| Units Demanded | Unit Price | Total Variable Costs | ||
| 73,000 | $31 | $1,606,000 | ||
| 83,000 | 30 | 1,826,000 | ||
| 93,000 | 29 | 2,046,000 | ||
| 103,000 | 28 | 2,266,000 | ||
| 113,000 | 27 | 2,486,000 |
How much profit will Calico Joe Fabrics have if a price of $26 is
charged and demand is 120,000?
| $480,000 |
| $2,760,000 |
| $3,120,000 |
| $120,000 |
Solutions
Expert Solution
| Correct Option D i.e. $120,000 | ||||
| Note 1: Calculation of Profit | ||||
| Sales Revenue | 3,120,000 | (120000*26) | ||
| Less: Variable cost | 2,640,000 | (120000*22) | ||
| Contribution margin | 480,000 | |||
| Less: Fixed cost | 360,000 | |||
| profit | 120,000 | |||
| Note 2: | ||||
| Units Demanded | Unit Price | Total Variable Costs | Variable cost per unit=(Total variable cost/Units Demand) | |
| 73,000 | 31 | 1,606,000 | 22 | |
| 83,000 | 30 | 1,826,000 | 22 | |
| 93,000 | 29 | 2,046,000 | 22 | |
| 103,000 | 28 | 2,266,000 | 22 | |
| 113,000 | 27 | 2,486,000 | 22 | |
ekkarill92 answered 2 years agoRelated Solutions
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