Question

A firm expects to sell 24,800 units of its product at $10.80 per unit and to incur variable costs per unit of $5.80. Total fixed costs are $68,000. What is the firm's net income?

Answer 1

The firm's net income is $55,040. In order to find the firm's net income, the calculation involves deducting both the total variable costs and the fixed costs from the total revenue.

Step-by-step explanation:

In order to ascertain the firm's net income, the calculation involves deducting both the total variable costs and the fixed costs from the total revenue.

With a total variable cost per unit of $5.80 and an anticipated sale of 24,800 units, the aggregate variable costs amount to $143,840 (24,800 * $5.80).

The total revenue, derived by multiplying the number of units sold (24,800) by the unit price ($10.80), reaches $266,880 (24,800 * $10.80).

Finally, the net income is determined by subtracting the total variable costs and the fixed costs from the total revenue: $266,880 - $143,840 - $68,000 = $55,040.

This computation encapsulates the financial performance of the firm, illustrating the surplus after accounting for variable and fixed costs against the backdrop of total.