Newport Corporation is planning to sell 50,000 lawn mowers for $100 each. The fixed costs are $2,000,000. If the company realizes a profit of $400,000, what would the variable costs be?

Question

Quizplus · Accepted Answer

Profit = (Selling price per unit × Quantity sold) - Fixed cost - Variable cost per unit × Quantity sold

$400,000 = ($100 × 50,000) - $2,000,000 - Variable cost per unit × 50,000

$400,000 = $5,000,000 - $2,000,000 - Variable cost per unit × 50,000

Variable cost per unit × 50,000 = $2,600,000

Variable cost per unit = $2,600,000 ÷ 50,000 = $52

Therefore, the variable costs would be $2,600,000.

Newport Corporation Is Planning to Sell 50,000 Lawn Mowers for $100