Question

Southwest U's campus book store sells course packs for $18 each, the variable cost per pack...

Southwest U's campus book store sells course packs for $18 each, the variable cost per pack is $8, fixed costs to produce the packs are $200,000, and expected annual sales are 51,000 packs. What are the pre-tax profits from sales of course packs?

a.

$285,200
b.

$310,000
c.

$372,000
d.

$248,000
e.

$306,900
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Homework Answers

Answer #1

Answer is $310,000

Selling Price per pack = $18.00
Variable Cost per pack = $8.00
Fixed Costs = $200,000
Sales Volume = 51,000

Contribution Margin per pack = Selling Price per pack - Variable Cost per pack
Contribution Margin per pack = $18.00 - $8.00
Contribution Margin per pack = $10.00

Pretax Profit = Contribution Margin per pack * Sales Volume - Fixed Costs
Pretax Profit = $10.00 * 51,000 - $200,000
Pretax Profit = $510,000 - $200,000
Pretax Profit = $310,000

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