Question

# e Goode Perk Company produces several models of coffee makers. There is little difference in the...

e Goode Perk Company produces several models of coffee makers. There is little difference in the production time required for the various model coffee machines. The plant is designed to produce 160 coffee machines per eight-hour shift, and there are two shifts per working day.

However, the plant does not operate for the full eight hours: the employees take two 12-minute breaks in each shift, one in the first four hours and one in the second four hours; two hours per week are devoted to cleaning the factory and performing maintenance on the machines; one four-hour period every four weeks is devoted to the meeting of the quality circle. The plant usually produces about 3,500 coffee machines per four-week period. You may ignore holidays in solving this problem. The selling price of the product is \$199.95. The variable costs per unit are broken down as follows:

- Labor \$60.25

- Raw material 25.70

- Purchased component 21.50

The fixed costs total \$503,000 per year.

Utilizing the information in question 4 about the Goode Perk Company, what is the estimated profit of the company if they sell 10,000 units in the current year?

A \$650,000

B \$40,000

C \$147,000

D Cannot be calculated

the following information is needed to calculate the estimated profit for a year

• The number of units to be sold is 10,000 in a year
• the sales price per unit is \$199.95
• The total sales revenue is \$1,999,500 (10,000 units x \$199.95)
• the variable cost per units are calculated as below variable

variable cost per unit = Labor +Raw material +Purchased component +Variable overhead

=\$60.25 +\$25.70+\$21.50+\$27.50

=\$134.95

the variable cost per unit is \$134.95

the total variable cost is calculated as under

Total variable cost = sales volume in units x variable cost per unit

=10,000 units x \$134.95

=\$1,349,500

the fixed cost are \$503,000

the net operating profit is calculated below

net operating profit = sales revenue - total variable cost - fixed cost

=\$1,999,500 - \$1,349,500 -\$503,000

=\$147,000

the answer is "C" \$147,000 is the estimated profit for the current year

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