A firm operated at 80% of capacity for the past year, during which fixed costs were $330,000, variable costs were 70% of sales, and sales were $1,000,000. Operating profit was:
A) $140,000
B) ($30,000)
C) $370,000
D) $670,000

Question

Quizplus · Accepted Answer

First, we need to calculate the total cost:
Variable costs = 70% of sales = 0.7 x $1,000,000 = $700,000
Total cost = Fixed costs + Variable costs = $330,000 + $700,000 = $1,030,000

To calculate operating profit, we need to subtract the total cost from sales:
Operating profit = Sales - Total cost = $1,000,000 - $1,030,000 = ($30,000)

Therefore, the correct answer is B. The firm operated at 80% of capacity and had a loss of $30,000.

A Firm Operated at 80% of Capacity for the Past