Question

Assume that Cane expects to produce and sell 86,000 Alphas during the current year. A supplier has offered to manufacture and deliver 86,000 Alphas to Cane for a price of $104 per unit. If Cane buys 86,000 units from the supplier instead of making those units, how much will profits increase or decrease

Answer 1

Profit increased by 2236000

Step-by-step explanation:

Hello, I feel that a part of the question might be missing here. I took the liberty of finding it and have attached it as a document titled "Question".

In order to find the profit, we require certain information:

1. Selling Price per unit: $150

2. Quantity sold: 86,000 units

3. Cost per unit: $130 if manufactured by Cane. $104 if purchased through supplier.

I will show the calculation in two different methods, personally I find method two easier :)

Method 1

Total Profit = Total Revenue - Total Costs

1. If manufactured by Cane, profit:

(150 x 86000) - (130 x 86000) = $12900000 - $11180000 = $1720000

2. If purchased from supplier, profit:

(150 x 86000) - (104 x 86000) = $12900000 - $8944000 = $3956000

Method 2

Total Profit = [(Selling price per unit - Cost per unit) x Total quantity sold]

1. [($150 - $130) x 86000] = $1720000

2. [($150 - $104) x 86000] = $3956000

Therefore, profit has increased from $1720000 to $3956000 by $2236000.