Ships Ahoy is a small company that makes model sailboat kits priced at $120 each. (There is no quantity discount.)The costs of the materials that go into each kit are $45. It costs $5 in labour to assemble a kit. The company has monthly expenses of $1,000 for rent and insurance, $200 for heat and electricity, $500 for advertising in sailing and hobby magazines, and $3,500 for the monthly salary of its owner. If Ships Ahoy sells 150 kits in a given month, its monthly profit will be:
A)$12,700.
B)$5,300.
C)$10,500.
D)$12,800.

Question

Quizplus · Accepted Answer

The profit can be calculated by subtracting the total costs from the total revenue. Total revenue from selling 150 kits at $120 each is $18,000 (150 * $120). The cost of materials per kit is $45, and the labor cost per kit is $5, so the total cost per kit is $50. For 150 kits, this amounts to $7,500 (150 * $50). The fixed monthly expenses are $1,000 (rent and insurance) + $200 (heat and electricity) + $500 (advertising) + $3,500 (salary) = $5,200. Therefore, the total costs are $7,500 (variable costs) + $5,200 (fixed costs) = $12,700. Subtracting the total costs ($12,700) from the total revenue ($18,000) gives a profit of $5,300.

Ships Ahoy Is a Small Company That Makes Model Sailboat