A firm operated at 80% of capacity for the past year, during which fixed costs were $210,000, variable costs were 70% of sales, and sales were $1,000,000. Operating profit was: Group of answer choices $90,000 $210,000 $590,000 $490,000 Flag this Question Question 3

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Jamir Marsh

Business

13 September, 07:25

A firm operated at 80% of capacity for the past year, during which fixed costs were $210,000, variable costs were 70% of sales, and sales were $1,000,000. Operating profit was: Group of answer choices $90,000 $210,000 $590,000 $490,000 Flag this Question Question 3

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Answers (1)

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Sophie · Answer 1

The answer is: $90,000

Explanation:

We must first determine the cost of goods sold:

COGS = variable costs = 70% x 1,000,000 COGS = $700,000

I will assume all fixed costs are operating expenses.

Then we elaborate a simple income statement:

Sales $1,000,000

COGS ($700,000)

Gross profit $300,000

Operating expenses ($210,000)

Operating profit $90,000