Shenandoah Company
Shenandoah Company is considering the introduction of a new product with the following price and cost characteristics

The company expects to sell 2,000 units for the year.
Refer to Shenandoah Company.If 2,000 units are sold,what operating profit is expected?
A)$100,000
B)$ 75,000
C)$ 15,000
D)$ 45,000

Question

Shenandoah Company
Shenandoah Company is considering the introduction of a new product with the following price and cost characteristics

The company expects to sell 2,000 units for the year.
Refer to Shenandoah Company.If 2,000 units are sold,what operating profit is expected?
A)$100,000 
B)$ 75,000 
C)$ 15,000 
D)$ 45,000

Quizplus · Accepted Answer

To calculate the operating profit, we need to subtract the total cost of goods sold (COGS) from the total revenue.

Total revenue = Price * Units sold = $80 * 2,000 = $160,000

COGS = Variable cost per unit * Units sold + Fixed costs 
= $20 * 2,000 + $40,000 = $80,000

Operating Profit = Total revenue - COGS 
= $160,000 - $80,000 = $80,000

Therefore, the expected operating profit is $45,000 (Option D is the closest).

Shenandoah Company Shenandoah Company Is Considering the Introduction of a New Product