Question

Assume that you can sell a new product at $5 per unit. Your variable costs are $3 per unit and your fixed costs are $20,000. What will be your profit before taxes if you sell 12,000 units next year?

Answer 1

To calculate the profit before taxes, subtract the variable costs and fixed costs from the total revenue. For selling 12,000 units at $5 per unit, the profit before taxes would be $4,000.

Step-by-step explanation:

To calculate the profit before taxes, we need to subtract the variable costs and fixed costs from the total revenue. Total revenue can be calculated by multiplying the selling price per unit ($5) by the number of units sold (12,000), which equals $60,000. Total costs can be calculated by adding the variable costs per unit ($3) to the fixed costs ($20,000), which equals $56,000. Finally, to calculate the profit before taxes, we subtract the total costs from the total revenue: $60,000 - $56,000 = $4,000. Therefore, the profit before taxes if you sell 12,000 units next year would be $4,000.