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A firm sells 20,000 units of a particular product at a price of $50 per unit. The company spends $30 per unit in raw materials and labor charges. What are company's fixed costs if it made a profit of $100,000?
Suggested Answer: C
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30 comments · newest first
CH
Chi
7 months ago
I agree, D) $400,000 seems correct based on the math!
RU
Rusty
7 months ago
Right! Variable costs are $600,000. So, fixed costs must be $400,000.
LA
Lashawna
8 months ago
Total revenue is $1,000,000. Then subtract variable costs.
JE
Jesusita
8 months ago
If profit is $100,000, we need to find total revenue first.
TA
Tandra
8 months ago
I feel like the fixed costs are key here.
MA
Malcolm
8 months ago
Wait, how can fixed costs be that high?
BE
Beckie
8 months ago
I think fixed costs are $300,000.
RE
Refugia
8 months ago
Total revenue is $1,000,000.
JO
Jose
9 months ago
I don't know, but I'm pretty sure the answer involves a calculator and some serious number crunching. Maybe I should have paid more attention in my accounting class.
MI
Micaela
9 months ago
Hmm, this question is making my head spin. I'll just go with the classic B) $200,000 and hope for the best.
LO
Louis
9 months ago
E) $500,000 has to be the correct answer. That's the only way the numbers would work out.
RE
Rebbecca
9 months ago
D) $400,000 seems like the right answer to me. The fixed costs must be high for a company that size.
HA
Hannah
9 months ago
I'm pretty sure the answer is C) $300,000. That's the only way the company could have made a $100,000 profit.
JU
Justine
9 months ago
I think I got this. The key is recognizing that profit = total revenue - total costs. So if we know the profit is $100,000, and we can calculate the total revenue and variable costs, then the fixed costs must be whatever's left over.
NO
Nohemi
10 months ago
They sold 20,000 units at $50 each.
MA
Marci
10 months ago
This question is tricky! I think I need to calculate carefully.
KI
Kizzy
10 months ago
The answer is B) $200,000. This is the only option that makes sense given the information provided.
JU
Jutta
10 months ago
Totally agree, $300,000 makes sense!
SH
Sherell
11 months ago
This seems pretty straightforward to me. We just need to rearrange the profit equation to solve for the fixed costs. Total revenue minus total variable costs equals profit, so fixed costs must be the remaining amount.
GW
Gwenn
11 months ago
Wait, I'm a little confused. How do we know the fixed costs if we're just given the profit? Shouldn't we need to know the total costs to figure that out?
YU
Yuette
11 months ago
Okay, I think I can do this. Let me break it down step-by-step: total revenue is 20,000 units x $50 per unit, and total variable costs are 20,000 units x $30 per unit. Then I just need to subtract the variable costs from the revenue and set that equal to the $100,000 profit.
PR
Providencia
11 months ago
Hmm, this looks like a straightforward profit calculation problem. I'll need to find the total revenue and total variable costs, then subtract to get the fixed costs.
JA
James
6 months ago
I agree, option D is the answer!
HA
Harrison
6 months ago
Variable costs are $600,000.
TY
Tyra
7 months ago
Total revenue is $1,000,000.
NO
Nobuko
10 months ago
So, fixed costs must be $400,000.
GA
Gail
12 months ago
I feel like the answer might be $200,000, but I’m not entirely confident. I need to double-check my calculations!
GA
Gail
12 months ago
I practiced a similar question where we had to find fixed costs based on profit and variable costs. I think it involves subtracting total variable costs from total revenue.
SY
Sylvia
12 months ago
If I remember correctly, fixed costs can be found by rearranging the profit formula, but I can't recall the exact steps.
TA
Tanja
1 year ago
I think we need to calculate total revenue first, which is 20,000 units times $50, but I'm not sure how to relate that to fixed costs.