Answer :
Final answer:
Ed's total costs are $2,912,000. Ed's total revenue is $3,250,000. Ed's profit/loss is $338,000.
Explanation:
To calculate Ed's total costs, we need to find the total variable costs and add it to the total fixed costs. For the first 1,000 units, the variable cost per unit is $250, so the total variable cost is 1,000 x $250 = $250,000. For the next 1,000 units, the variable cost per unit is $420, so the total variable cost is 1,000 x $420 = $420,000. For the next 1,000 units, the variable cost per unit is $620, so the total variable cost is 1,000 x $620 = $620,000. For the remaining 2,000 units, the variable cost per unit is $810, so the total variable cost is 2,000 x $810 = $1,620,000.
Adding up all the variable costs, we have $250,000 + $420,000 + $620,000 + $1,620,000 = $2,910,000. Adding this to the total fixed costs of $2,000, Ed's total costs are $2,000 + $2,910,000 = $2,912,000.
Ed's total revenue can be calculated by multiplying the selling price per desk ($650) by the number of desks sold (5,000). So, the total revenue is $650 x 5,000 = $3,250,000.
To find Ed's profit/loss, we subtract the total costs from the total revenue. So, the profit/loss is $3,250,000 - $2,912,000 = $338,000.
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Answer and Explanation:
The computation is shown below:
a) Total Cost
= Fixed Cost + Variable Cost
= 2000 + 250 × 1000 + 420 × 1000 + 620 × 1000 + 810 × 2000
= $29,12,000
b) Total Revenue is
= Price × Quantity
= 650 × 5000
= $3,250,000
c) Profit is
= Total Revenue- Total Cost
= $3,250,000 - $2,912,000
= $338,000
