Assume that you can sell a new product at $5.00 per unit. Variable costs are $3.00 per unit, and fixed costs are $20,000. What will be the profit before taxes if you sell 12,000 units next year?
A)$0
B)$2,000
C)$4,000
D)$8,000

Question

Quizplus · Accepted Answer

First, let's calculate the total revenue:
12,000 units x $5.00/unit = $60,000

Next, let's calculate the total variable costs:
12,000 units x $3.00/unit = $36,000

Now, let's calculate the total contribution margin (total revenue - total variable costs):
$60,000 - $36,000 = $24,000

Finally, let's calculate the profit before taxes (contribution margin - fixed costs):
$24,000 - $20,000 = $4,000

Therefore, the best choice is C, as it represents the correct profit before taxes when selling 12,000 units.

Assume That You Can Sell a New Product at $5