Question

Partner Industries sells a single product for $50 that has a variable cost of $30. Fixed costs amount to $5 per unit when anticipated sales targets are met. If the company sells one unit in excess of its break-even volume, profit will be:____

a. $15.
b. $20.
c. $50.
d. an amount that cannot be derived based on the information presented.
e. an amount other than those in choices "A," "B," and "C", but one that can be derived based on the information presented.

Answer 1

b. $20.

Step-by-step explanation:

Regardless of what the break-even volume is, at this volume profits are zero.

This means that any unit sold beyond this point will provide a profit equivalent to its marginal benefit, which is its selling price subtracted by its variable cost.

If a product sells for $50 and has a variable cost of $30, by selling one unit in excess of its break-even volume, the profit will be:

`P= \$50-\$30 =\$20`

The profit will be $20.