Magnum Beverages sells it premium champagne at $55 per bottle. It current costs $40 per bottle to produce each bottle of champagne. Magnum has overhead costs of $1,800 per month. If Magnum produced and sold 100 bottles of champagne last month, has the company adequately priced each bottle of champagne to make a positive monthly operating income?
A) Yes, since the revenues from the sales exceeds the total costs incurred.
B) No, because the revenues from the sales just equals the total costs incurred.
C) No, because the revenues from the sales is less than the total costs incurred.
D) This cannot be determined due to lack of sufficient information.

Question

Quizplus · Accepted Answer

Total Revenues - Total Costs = Operating Income (Loss); (100 x $55) - (100 x $40) - $1,800 = $5,500 - $4,000 - $1,800 = ($300) Operating Loss.

Magnum Beverages Sells It Premium Champagne at $55 Per Bottle