Question

Suppose carl's candies sells 100 boxes of candy for $5 each. the total fixed cost of the 100 boxes is $100 and the average variable cost of the 100 boxes is $1.50 per box. carl's makes a profit per unit of:

A. $1.50.
B. $150.
C. $250.
D. $2.50.

Answer 1

Carl's Candies makes a profit per unit of $2.50 (option D), which is obtained by subtracting the sum of the average variable cost and average fixed cost per unit from the selling price per unit.

Step-by-step explanation:

Suppose Carl's Candies sells 100 boxes of candy for $5 each. This question involves calculating the profit per unit. To do so, we will take into account the total fixed cost, the average variable cost per unit, and the selling price per unit.

The total fixed cost is given as $100, and the average variable cost is given as $1.50 per box. The selling price per box is $5. To find the profit per unit, we subtract the sum of the average variable cost and the average fixed cost per unit from the selling price per unit.

The average fixed cost per unit is the total fixed cost divided by the quantity, which is $100/100 boxes = $1 per box. Thus, the total cost per unit (including both variable and fixed costs) is $1.50 (average variable cost) + $1 (average fixed cost) = $2.50.

The profit per unit can now be calculated by subtracting the total cost per unit from the selling price per unit: $5 (selling price) - $2.50 (total cost) = $2.50. Therefore, Carl's makes a profit per unit of $2.50.