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...

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. 

Expert Answers
durbanville eNotes educator| Certified Educator

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