Question

Sugar Corporation manufactures specialized sugar cubes that are used in tea. The company has a sales price of $22, variable costs of $10 per unit, and fixed costs of $25,500. Sugar expects profit of $316,000 at its anticipated level of sales. If Sugar sells 4,400 units more than expected, how much higher will its profits be?

a. $316,000
b. $263,200
c. $96,800
d. $52,800

Answer 1

The profits of Sugar Corporation would be higher by $52,800 if it sells 4,400 units more than expected, calculated using the contribution margin per unit.

Step-by-step explanation:

The question is asking us to calculate the additional profit that Sugar Corporation would realize if it sold 4,400 units more than anticipated. Since the company has a sales price of $22 per unit and variable costs of $10 per unit, the contribution margin per unit is $22 - $10 = $12. If Sugar Corporation sells 4,400 more units, the additional profit will be 4,400 units × $12 per unit = $52,800. Therefore, the profits would be higher by $52,800 if Sugar Corporation sells 4,400 units more than expected, which corresponds to option d.