Question

Sugar Corp has a selling price of $22, variable costs of $10 per unit, and fixed costs of $25,500. Maple expects profit of $316,000 at its anticipated level of production. If Sugar sells 4,400 units more than expected, how much higher will its profits be? Multiple Choice $263,200 $52,800 $316,000 $96,800

Answer 1

Correct option is: b. $52,800
Workings:
	Per unit	Current Total	Proposed Total	Difference
Units		28,458	32,858
		($341500 / $12)	(28458 + 4400)
Revenues	$                 22.00	$           6,26,083	$           7,22,883
Variable costs	$                 10.00	$           2,84,583	$           3,28,583
Contribution margin	$                 12.00	$           3,41,500	$           3,94,300
Fixed Expenses		$               25,500	$              25,500
Net operating Income		$           3,16,000	$           3,68,800	$                    52,800