+598 The item in question at a unit selling price of $100. Red River’s forecast volume of sales for the first year is 8000 units. The annual fixed cost for adding this product to the inventory is estimated to be $200,000. Also variable cost per unit is $60.
1. If the last 500 units are sold at $75 each, what is Mr. Lee’s net income for the forecast sales volume of 8000 units?
Any help would be greatly appreciated, thanks
Well, obviously, if the last 500 units are sold @$75 each, he will get: 500 X $75=$37,500. But he started with 8,000 units, which means:8,000 - 500=7,500 units sold at $100=$750,000 + $37,500=$787,500. And if we assume his total cost was $680,000, then $787,500 - $680,000=$107,500. This would be his total profit given the condition in your question.
