Question

If our fixed expenses are $20,000, and sales are $550,000, and our unit selling price is $55, and our unit variable expense is $44; what would profits be?

Answer 1

Profit = Sales - Expenses
Expenses = Fixed + Variable
No. of units sold = $550,000 / 55 = 10,000
Variable expenses = $44 x 10,000 = $440,000
Expenses = 20,000 + 440,000 = $ 460,000
So, profit = 550,000 - 460,000 = $ 90,000.