Maize Plastics manufactures and sells 50 bottles per day.Fixed costs are $30,000 and the variable costs for manufacturing 50 bottles are $10,000.Each bottle is sold for $1,000.How would the daily profit be affected if the daily volume of sales drop by 10%?
A) profits are reduced by $4,000
B) profits are reduced by $1,000
C) profits are reduced by $5,000
D) profits are reduced by $6,000

Question

Quizplus · Accepted Answer

Explanation:Daily profit = (Selling price per bottle * Number of bottles sold) - (Fixed costs + Variable costs)= (1000 * 50) - (30000 + 10000)= 50000 - 40000= 10000If the daily volume of sales drops by 10%, the number of bottles sold will be 50 * 0.9 = 45.New daily profit = (1000 * 45) - (30000 + 10000)= 45000 - 40000= 5000Therefore, the daily profit will be reduced by 10000 - 5000 = $5000.

Maize Plastics Manufactures and Sells 50 Bottles Per Day