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3 June, 05:02

A firm operated at 80% of capacity for the past year, during which fixed costs were $210,000, variable costs were 70% of sales, and sales were $1,000,000. Operating profit was: Group of answer choices $90,000 $210,000 $590,000 $490,000 Flag this Question Question 3

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  1. 3 June, 05:11
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    The answer is: $90,000

    Explanation:

    We must first determine the cost of goods sold:

    COGS = variable costs = 70% x 1,000,000 COGS = $700,000

    I will assume all fixed costs are operating expenses.

    Then we elaborate a simple income statement:

    Sales $1,000,000

    COGS ($700,000)

    Gross profit $300,000

    Operating expenses ($210,000)

    Operating profit $90,000
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