Assume a firm is developing, manufacturing, and selling a basic software package at $500 per copy. Raw materials and direct labor total $200 per copy. Fixed costs are $250,000. If the firm sells 5,000 units per year, what will be the operating profit?

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Quizplus · Accepted Answer

The operating profit can be calculated by subtracting the total costs from the total revenue. Total revenue is $500 * 5,000 = $2,500,000. Total costs include fixed costs of $250,000 and variable costs of $200 * 5,000 = $1,000,000. Thus, total costs are $1,250,000. Operating profit is $2,500,000 - $1,250,000 = $1,250,000.

Assume a Firm Is Developing, Manufacturing, and Selling a Basic