Question

A small manufacturer that makes clothespins and other household products buys new injection molding equipment for a cost of $500,000. This will allow the manufacturer to make more clothespins in the same amount of time with an estimated increase in sales of 25%. If the manufacturer currently makes 75 tons of clothespins per year, which sell at $18,000 per ton, what will be the increase in revenue next year from the new equipment

Answer 1

$337,500

Step-by-step explanation:

Data provided in the question

Cost of an equipment = $500,000

Increased in sales = 25%

Currently number of tons made per year = 75 tons

Selling price per ton = $18,000

Based on the above information, the increased in revenue next year is

= Increased in sales × Currently number of tons made per year × Selling price per ton

= 25% × 75 tons × $18,000

= $337,500

By applying the above formula we can get the increased in revenue amount