Homework Help

Marketers estimate that the variable cost of manufacturing a new PlayStation will be...

user profile pic

zoeysparks | Student, Undergraduate | eNotes Newbie

Posted October 10, 2013 at 2:24 AM via web

dislike 1 like

Marketers estimate that the variable cost of manufacturing a new PlayStation will be $85.00 per unit. The selling price of the product is to be $180.00. The fixed costs applicable to the new PlayStation are $1,100,000 per year and capacity per year is 70,000 units.

a) Calculate net profit at 75% of capacity.

b) If we want total revenue to be $2,340,000, what should we expect as a profit? c) Calculate the maximum net profit possible. d) If we want net profit to be $20,000, how many units must be sold? 

1 Answer | Add Yours

user profile pic

durbanville | High School Teacher | (Level 1) Educator Emeritus

Posted October 10, 2013 at 6:37 AM (Answer #1)

dislike 0 like

The formula to calculate the net profit (also called net income) is selling price - cost price divided by selling price times 100:

`(SP - CP)/(SP) times 100` 

The SP is $180 each and the company is operating at 75% capacity:

`therefore 75/100 times 70000=52500` units being made. 

Therefore selling 52500 units at $180 each renders $9450000.

The CP relates to the expenses:

`$85 times 52500= 4462500` (variable cost) and $1 100 000 fixed costs.

`therefore NP= (9450000-(4462500 + 1100000))/9450000 times 100`

`therefore NP=41.14%` (rounded to 2 decimal digits)

Please note that eNotes rules do not allow for the answering of multiple questions. Please repost your remaining questions separately. 

Ans:The net profit is $41.14%

Join to answer this question

Join a community of thousands of dedicated teachers and students.

Join eNotes