Vandelay Industries manufactures a range of latex products. Vandelay recently purchased new equipment to manufacture latex gloves for the medical community. The new machinery leases for $70,000 annually and can produce 10,000 pairs of gloves each day. The raw latex material for each pair of gloves costs $.03 and Vandelay sells the gloves at a wholesale price of $.10 a pair. Currently, sales are 2,500,000 annually. What is the profit on the gloves if the machinery lease is the only fixed cost considered?
A) $105,000
B) $250,000
C) $75,000
D) $175,000

Question

Quizplus · Accepted Answer

The profit is calculated as total revenue minus total costs. Total revenue is 2,500,000 pairs * $0.10 = $250,000. Total variable cost is 2,500,000 pairs * $0.03 = $75,000. The fixed cost is $70,000. Profit = $250,000 - $75,000 - $70,000 = $105,000.

Vandelay Industries Manufactures a Range of Latex Products