A firm with 60 percent of sales going to variable costs, $1.5 million fixed costs, and $500,000 depreciation would show what accounting profit with sales of $3 million? Ignore taxes.(use the values in dollar)
A)Zero loss
B)$370,000 loss
C)$666,667 Loss
D)$800,000 loss

Question

Quizplus · Accepted Answer

The accounting profit is calculated as follows: Sales - Variable Costs - Fixed Costs - Depreciation = Accounting Profit. With sales of $3 million, 60% going to variable costs equals $1.8 million. Subtracting the $1.5 million fixed costs and $500,000 depreciation from the remaining $1.2 million gives an accounting profit of -$800,000, indicating an $800,000 loss.

A Firm with 60 Percent of Sales Going to Variable