Question

A product costing 60 cents per unit to produce had been selling at the average rate of 1,200,000 units per month. After the product was improved, sales increased to an average of 2,000,000 units per month. However, the new product cost five percent more to produce. If the manufacturer's selling price in each instance was 75 cents per unit, what was the manufacturer's added profit per month with the newer product?

Answer 1

please give me 2 minutes to solve

Answer 2

The added profit per month was $60,000

Before improvement,

• cost of manufacturing 1 piece = 60 cents
• total units produced per month = 1,200,000
• total cost of production = $ 0.60 * 1,200,000 = $720,000
• Selling Price of 1 piece = 75 cents
• total revenue = $ 0.75 * 1,200,000 = $900,000
• total profit = $900,000 - $720,000 = $180,000

After improvement,

• cost of manufacturing 1 piece = 60 + ( 60 * 5%) cents = 63 cents
• total units produced per month = 2,000,000
• total cost of production = $ 0.75 * 2,000,000 = $1,260,000
• Selling Price of 1 piece = 75 cents
• total revenue = $ 0.75 * 2,000,000 = $1,500,000
• total profit = $1,500,000 - $1,260,000 = $240,000

Hence added profit per month with the newer product = $240,000 - $180,000 = $60,000