Old MacDonald had a farm with expected fixed costs for next year of $91,000. The projected selling price per bushel is $12, with variable costs of $5 per bushel.
How many bushels past the breakeven point does MacDonald have to sell to realize a pre-tax profit of $37,100?
A) 18,300
B) 5,300
C) 7,420
D) 13,000

Question

Quizplus · Accepted Answer

To calculate the number of bushels past the breakeven point needed to realize a pre-tax profit of $37,100, first, find the breakeven point in bushels. The breakeven point is where total revenue equals total costs (fixed costs + variable costs). The profit formula is Profit = (Selling Price per Bushel - Variable Cost per Bushel) * Number of Bushels - Fixed Costs. To find the breakeven point, set Profit to $0 and solve for the Number of Bushels. Breakeven Point = Fixed Costs / (Selling Price per Bushel - Variable Cost per Bushel) = $91,000 / ($12 - $5) = $91,000 / $7 = 13,000 bushels. To find how many bushels past the breakeven point are needed to realize a pre-tax profit of $37,100, use the profit formula with the desired profit: $37,100 = ($12 - $5) * Number of Bushels - $91,000. Solving for the Number of Bushels gives the total bushels needed to achieve this profit, including the breakeven point. To find just the bushels past the breakeven point, subtract the breakeven point bushels from the total bushels needed. $37,100 = $7 * Number of Bushels - $91,000; $37,100 + $91,000 = $7 * Number of Bushels; $128,100 = $7 * Number of Bushels; Number of Bushels = $128,100 / $7 = 18,300 bushels total. Bushels past the breakeven point = Total bushels - Breakeven bushels = 18,300 - 13,000 = 5,300 bushels.

Old MacDonald Had a Farm with Expected Fixed Costs for Next