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 |
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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