Question

The manufactures sells hiking shoes. During the year 2019, the company sold 1,500 hiking shoes. The selling price is $100 per unit and variable cost per unit is $48. Total fixed costs are $15,000 per year. What was company’s profit (before taxes) in 2019?

Answer 1

Selling price per unit = $ 100 per unit.

Variable cost per units = $ 48 per unit.

Total number of units sold = 1,500 units.

We have equation,

Sales - variable cost = Fixed cost + Profit.

Sales = 1,500 units x $ 100 per unit.

Sales = $ 150,000.

Variable cost =1,500 units x $ 48 per unit.

Variable cost = $ 72,000.

Fixed cost = $ 15,000 (given).

Sales - variable cost = fixed cost + Profit

150,000 - 72,000 = 15,000 + Profit.

78,000 = 15,000 + Profit.

Profit = $ 63,000.

Therefore, Profit before tax = $ 63,000.

SUMMARY:

Sales - total variable cost = fixed cost + Profit.

By solving equation, we get profit before interest amounting to $ 63,000.

Therefore, company's profit before taxes in 2019 will be $63,000.