Sails Ahoy, a small company that makes model sailboat kits priced at $120 each, spends $45 on materials and $5 in labour to produce each kit.The company incurs monthly expenses of $1,000 for rent and insurance, $200 for heat and electricity, $500 for advertising, and $3,500 for the proprietor's salary.If Sails Ahoy sells 150 kits in a given month, its monthly profit will be _____.
A)$5,300
B)$10,500
C)$12,700
D)$12,800

Question

Quizplus · Accepted Answer

Profit = total revenue - total cost = (unit price F1F1F1S1F1F1F10 quantity sold) - (fixed cost + variable cost).Here, total revenue = $120 F1F1F1S1F1F1F10 150 = $18,000.The variable cost is the labour and materials for each kit ($5 + $45 = $50) times the number of kits sold (150 kits), or $50 F1F1F1S1F1F1F10 150 = $7,500.The fixed costs are $1,000 rent and insurance, $200 for heat and electricity, $500 for advertising, and $3,500 salary for the owner ($5,200 total).Thus the total cost = $7,500 + $5,200 = $12,700.The monthly profit is $18,000 - $12,700 = $5,300.

Sails Ahoy, a Small Company That Makes Model Sailboat Kits