Asked by Bryce Bloomquist on Apr 30, 2024
Verified
At break-even point a company sells 1200 widgets. Its selling price is $6 per widget variable cost is $2 per widget and its fixed cost is $4 per widget.
Instructions
If it sells 200 additional widgets determine the company's incremental profit.
Incremental Profit
The additional profit derived from a specific business decision, comparing the profit levels before and after the decision.
Selling Price
The amount at which a product or service is sold to customers.
Variable Cost
Financial outlays that fluctuate based on the activity levels or production volumes within a company.
- Apply concepts of contribution margin across a range of business situations.
Verified Answer
ZK
Zybrea KnightMay 05, 2024
Final Answer :
$6(1200) - $2(1200) - X = 0
Total fixed costs = X = $4800
Incremental profit = 200 × ($6 - $2) = $800
Total fixed costs = X = $4800
Incremental profit = 200 × ($6 - $2) = $800
Learning Objectives
- Apply concepts of contribution margin across a range of business situations.