Question

JT Inc. produces gourmet frozen dinners for the airline industry. JT has fixed costs of $200,000 and variable costs of $8 per frozen dinner. The selling price per frozen dinner is $13 and JT plans to sell 150,000 frozen dinners this year. If JT sells the 150,000 frozen dinners they planned to sell what will JT's operating profit be this year?

Answer 1

The operating profit for this year amounts to $ 550,000

Step-by-step explanation:

Operating Profit is computed below as:

Operating Profit = Revenue - Expense (Fixed Cost + Variable Cost)

= $1,950,000 - ($200,000 + $1,200,000)

= $1,950,000 - $1,400,000

= $550,000

Revenue = Number of frozen dinners × Selling Price

= 150,000 × $13

= $1,950,000

Variable Cost = Number of frozen dinners × Cost per frozen dinner

= 150,000 × $8

= $1,200,000