A company operated at 82% of its capacity for the past year.Fixed costs during this time were $152,000, variable costs were 60% of sales, and sales were $790,000.Calculate the company's operating profit.

Question

Quizplus · Accepted Answer

First, we need to calculate the total cost:

Total cost = Fixed cost + Variable cost

Variable cost = 60% of sales = 0.6 x $790,000 = $474,000

Total cost = $152,000 + $474,000 = $626,000

Next, we need to calculate the maximum potential revenue:

Maximum potential revenue = Capacity x Price

Since the company operated at 82% of its capacity, its maximum potential revenue was:

Maximum potential revenue = 0.82 x Capacity x Price

We don't have information about the price or the capacity, so we can't calculate the maximum potential revenue. However, we know the actual revenue, which was $790,000.

Therefore, the operating profit is:

Operating profit = Revenue - Total cost

Operating profit = $790,000 - $626,000 = $164,000

Therefore, the answer is D.

A Company Operated at 82% of Its Capacity for the Past