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17 September, 20:56

JT Inc. produces gourmet frozen dinners for the airline industry. JT has fixed costs of $200,000 and variable costs of $8 per frozen dinner. The selling price per frozen dinner is $13 and JT plans to sell 150,000 frozen dinners this year. If JT sells the 150,000 frozen dinners they planned to sell what will JT's operating profit be this year?

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  1. 17 September, 21:22
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    The operating profit for this year amounts to $ 550,000

    Explanation:

    Operating Profit is computed below as:

    Operating Profit = Revenue - Expense (Fixed Cost + Variable Cost)

    = $1,950,000 - ($200,000 + $1,200,000)

    = $1,950,000 - $1,400,000

    = $550,000

    Revenue = Number of frozen dinners * Selling Price

    = 150,000 * $13

    = $1,950,000

    Variable Cost = Number of frozen dinners * Cost per frozen dinner

    = 150,000 * $8

    = $1,200,000
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