Question

fred runs a designer candle-making business out of his basement. he sells the candles for $15 each, and every candle costs him $6 to manufacture. if his fixed costs are $2,300 per month, what is his projected net income or loss next month, for which he forecasts sales of 225 units?

Answer 1

Fred's projected net income for the next month is a loss of $275, calculated by subtracting total costs (both variable and fixed) from total revenues generated from sales of 225 units at $15 each.

Step-by-step explanation:

To calculate Fred's projected net income or loss for next month, we need to determine his total revenues and total costs. The sales forecast is for 225 units. The revenue from selling these units would be:

• Revenue = Price per unit × Number of units sold
• Revenue = $15 × 225
• Revenue = $3,375

The variable cost to manufacture these candles is:

• Variable Cost = Cost to manufacture per unit × Number of units
• Variable Cost = $6 × 225
• Variable Cost = $1,350

Fixed costs are constant, totaling $2,300 per month.

Now, we can calculate the net income:

• Net Income = Total Revenue - Total Costs (Variable Costs + Fixed Costs)
• Net Income = $3,375 - ($1,350 + $2,300)
• Net Income = $3,375 - $3,650
• Net Income = -$275

Therefore, Fred is projected to experience a loss of $275 for the next month based on his forecast sales of 225 units.