Use the information below to answer the following questions.
Sales Extraordinaire sells one particular photo frame. It estimates that it can sell as many frames as it produces. Sales price per unit $5.00
Variable cost per unit $2.00
Fixed costs per annum $9,000
-Refer to the table above. The sale of 5,000 photo frames would result in:

Question

Quizplus · Accepted Answer

First, let's calculate the contribution margin per unit:

Contribution margin per unit = Sales price per unit - Variable cost per unit
Contribution margin per unit = $5.00 - $2.00
Contribution margin per unit = $3.00

Next, let's calculate the break-even point in units:

Break-even point in units = Fixed costs / Contribution margin per unit
Break-even point in units = $9,000 / $3.00
Break-even point in units = 3,000 units

Since Sales Extraordinaire estimates that it can sell as many frames as it produces, selling 5,000 units is possible. Therefore, the sales revenue for 5,000 units would be:

Sales revenue = Sales price per unit x Number of units sold
Sales revenue = $5.00 x 5,000
Sales revenue = $25,000

Now, let's calculate the total costs for 5,000 units:

Total costs = Fixed costs + Variable costs
Total costs = $9,000 + ($2.00 x 5,000)
Total costs = $19,000

Finally, let's calculate the profit:

Profit = Sales revenue - Total costs
Profit = $25,000 - $19,000
Profit = $6,000

Therefore, selling 5,000 photo frames would result in a profit of $6,000. The correct answer is C.

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