At the end of 2018, Diatomic Company implemented a new labor process and redesigned its product with the expectation that input usage efficiency would increase. Now, at the end of 2019, the president of the company wants an assessment of the changes on the company's productivity. The data needed for the assessment are as follows: $\begin{array}{lrr}&2019&2018\
\text { Output } & 45,000 & 54,000 \
\text { Output prices } & \$ 10 & \$ 10 \
\text { Materials (lbs.) } & 22,500 & 22,950 \
\text { Materials unit price } & \$ 3 & \$4 \
\text { Labor (hrs.) } & 18,000 & 16,875 \
\text { Labor rate per hour } & \$ 5 & \$ 5 \
\text { Power (kwh) } & 11,250 & 14,625 \
\text { Price per kwh } & \$ 2 & \$ 3
\end{array}$
How much profit was generated in 2019?
A)$540,000
B)$319,950
C)$220,050
D)$270,000

Question

Quizplus · Accepted Answer

To calculate the profit for 2019, we need to subtract the total costs from the total revenue. Total revenue in 2019 = Output * Output prices = 45,000 * $10 = $450,000.Total costs in 2019 include costs of materials, labor, and power:- Materials cost = Materials (lbs.) * Materials unit price = 22,500 * $3 = $67,500.- Labor cost = Labor (hrs.) * Labor rate per hour = 18,000 * $5 = $90,000.- Power cost = Power (kwh) * Price per kwh = 11,250 * $2 = $22,500.Total costs in 2019 = $67,500 + $90,000 + $22,500 = $180,000.Profit in 2019 = Total revenue - Total costs = $450,000 - $180,000 = $270,000.

At the End of 2018, Diatomic Company Implemented a New