Maxim manufactures a cat food product called Green Health.Maxim currently has 10,000 bags of Green Health on hand.The variable production costs per bag are $1.80 and total fixed costs are $10,000.The cat food can be sold as it is for $9.00 per bag or be processed further into Premium Green and Green Deluxe at an additional $2,000 cost.The additional processing will yield 10,000 bags of Premium Green and 3,000 bags of Green Deluxe,which can be sold for $8 and $6 per bag,respectively.If Green Health is processed further into Premium Green and Green Deluxe,the total gross profit would be:
A)$68,000.
B)$78,000.
C)$96,000.
D)$98,000.
E)$100,000.

Question

Quizplus · Accepted Answer

The total revenue from selling Premium Green and Green Deluxe is (10,000 bags * $8) + (3,000 bags * $6) = $80,000 + $18,000 = $98,000. The total cost is the variable cost of $18,000 (10,000 bags * $1.80) plus fixed costs of $10,000 and additional processing costs of $2,000, totaling $30,000. The gross profit is $98,000 - $30,000 = $68,000.

Maxim Manufactures a Cat Food Product Called Green Health