Question
A company produces 5,000 units of a product in a month.
The fixed cost is Rs 10,000, and the variable cost per unit is Rs 15. If the company sells each unit at Rs 50, calculate the profit earned by the company.Solution
Fixed cost = Rs 10,000. Variable cost per unit = Rs 15. Total variable cost = 15 × 5,000 = Rs 75,000. Total cost = Fixed cost + Total variable cost = 10,000 + 75,000 = Rs 85,000. Revenue from selling 5,000 units = 50 × 5,000 = Rs 250,000. Profit = Revenue - Total cost = 250,000 - 85,000 = Rs 165,000.
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