Question

The "On the Road" bicycle manufacturing company sold 500 bicycles last year. Their fixed costs were $10 per unit, and their variable costs were $15 per unit. If each bike sells for $100, most likely the company had a

A. total profit of $37,000.
B. total profit of $50,000.
C. total loss of $37,000.
D. total loss of $50,000.
E. the company broke even.

Answer 1

(A) A total profit of $37,000

Step-by-step explanation:

Number of bicycles sold last year = 500

Assuming the company only manufactured 500 bicycles last year.

Fixed cost per unit = $10

Variable cost per unit = $15

Total cost per unit = fixed cost + variable cost = $10 + $15 = $25

Total cost for 500 units of bicycles manufactured = 500 × $25 = $12,500

Selling price per bike = $100

Total revenue for 500 bikes sold = 500 × $100 = $50,000

The company made a profit because the total revenue generated is greater than the total cost incurred.

Total profit = total revenue - total cost = $50,000 - $12,500 = $37,500

The company most likely had a profit of $37,000