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Product engineers and marketers estimate that the variable cost of manufacturing a new...

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kbfitzgerald2 | eNotes Newbie

Posted October 10, 2013 at 8:29 PM via web

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Product engineers and marketers estimate that the variable cost of manufacturing a new "genie" will be $55 per unit. The selling price is to be $130. The fixed costs applicable are $1,240,000 per year and the capacity per year is 60,000 units. Calculate the maximum net profit. 

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

Posted October 11, 2013 at 5:34 AM (Answer #1)

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To achieve the maximum profit (also called net income), the business will operate at full capacity. The selling price is measured against the fixed and variable costs  where  `CP= $1240000 + ($55 times 60000)= 4540000` and`SP=$130 times 60 000= 7800000`

`therefore 7800000-4540000`

  `= $3 260 000`

Ans:

The maximum net profit is $3 260 000 

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