Question

Maxim manufactures a cat food product called Green Health. Maxim currently has 10,000 bags of Green Health on hand. The variable production costs per bag are $1.90 and total fixed costs are $10,000. The cat food can be sold as it is for $9.15 per bag or be processed further into Premium Green and Green Deluxe at an additional $2,100 cost. The additional processing will yield 10,000 bags of Premium Green and 3,100 bags of Green Deluxe, which can be sold for $8.15 and $6.15 per bag, respectively. If Green Health is processed further into Premium Green and Green Deluxe, the total gross profit would be:

Answer 1

Total gross profit =$ 50,565

Step-by-step explanation:

Gross profit is the sales revenue less the cost of the goods sold. The cost of goods sold would include the variable cost of production, fixed cost and the further processing cost

$

Sales revenue (10,000×$8.15) + ( 3100 ×$6.15) = 100,565

Further processing cost (21,000)

Variable cost ( 10,000 ×$1.90) (19,000)

Fixed cost (10,000)

Gross profit 50,565