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11 November, 16:49

A firm expects to sell 25,000 units of its product at $11 per unit and to incur variable costs per unit of $6. Total fixed costs are $70,000. The pretax net income is:

a. $55,000.

b. $90,000.

c. $125,000.

d. $150,000.

e. $380,000.

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  1. 11 November, 20:34
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    a. $55,000

    Explanation:

    Pretax profit is net profit before tax.

    Profit equals sales - (fixed cost + variable costs)

    In this case:

    sales = selling price x sales volume

    = $ 11 x 25,000

    = $ 275,000.00

    Fixed cost = $ 70,000

    Variable costs=$6 x 25,000 = $ 150,000.00

    profits = $275,0000 - ($70,000+$150,000)

    =$275,000-220,000

    =$55,000.00
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