Sun Devil,Inc.
Sun Devil,Inc.is considering the introduction of a new product with the following price and cost characteristics

It expects to sell 70,000 units for the year.
Refer to Sun Devil,Inc;if 7,000 units are sold,what operating profit is expected?
A)$ 225,000
B)$ 50,000
C)$ 525,000
D)$ 350,000

Question

Sun Devil,Inc.
Sun Devil,Inc.is considering the introduction of a new product with the following price and cost characteristics

It expects to sell 70,000 units for the year.
Refer to Sun Devil,Inc;if 7,000 units are sold,what operating profit is expected?
A)$ 225,000 
B)$ 50,000 
C)$ 525,000 
D)$ 350,000

Quizplus · Accepted Answer

To calculate the operating profit at 7,000 units sold, we need to use the following formula:

Operating profit = (selling price per unit - variable cost per unit) * number of units sold - fixed costs

The selling price per unit is $40, and the variable cost per unit is $25, so the contribution margin per unit is $15.

Therefore, the operating profit at 7,000 units sold is:

Operating profit = ($15 * 7,000) - $700,000

Operating profit = $50,000

Therefore, the best choice is B, $50,000.

Sun Devil,Inc. Sun Devil,Inc.is Considering the Introduction of a New Product with Product