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9 June, 08:41

Suppose a company has $200 in fixed costs and $40 per unit in variable costs. The company sold 10 items for a total of $1,000. How much of a net profit or loss did this sale produce?

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  1. 9 June, 10:54
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    The $400 is the net profit.

    Explanation:

    For computing the net profit we apply the equation which is shown below:

    Net profit = Sales - variable cost - fixed cost

    where,

    Sales is $1,000

    Variable cost = variable cost per unit * number of unit = $40 * 10 = $400

    And we know that sales - variable cost = contribution

    So, contribution would be $1000 - $400 = $600

    And, the fixed cost is $200

    So, the profit would be = Contribution - fixed cost

    = $600 - $200

    = $400

    Hence, the $400 is the net profit.
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