A manufacturing company is considering producing a new product. The variable cost of the new product is $60 per unit, and the total fixed costs are $75,000 for a month. The company could produce 1,500 units per month, and sell the product for $125 each. What would be the net income at 90% capacity?
A) $10,000
B) $15,000
C) $12,750
D) $12,225
E) $16,000

Question

Quizplus · Accepted Answer

At 90% capacity, the company produces 1,350 units (90% of 1,500). Revenue is 1,350 units * $125 = $168,750. Variable costs are 1,350 units * $60 = $81,000. Net income = Revenue - Variable Costs - Fixed Costs = $168,750 - $81,000 - $75,000 = $12,750.

A Manufacturing Company Is Considering Producing a New Product