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Question

The total cost for Company X to produce a batch of tools is 10,000plus 3 per tool. Each tool sells for 8.Thegrossprofitearnedfromproducingandsellingthesetoolsisthetotalincomefromsalesminusthetotalproductioncost.Ifabatchof20,000$ tools is produced and sold, then Company X's gross profit per tool is :

A
$3.00
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B
$3.75
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C
$4.50
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D
$5.00
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E
$5.50
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Solution

The correct option is E $4.50
Total tools =20,000

Cost price per tools =$3

Total CP =20,000×3=$60,000

Cost for company to produce these tools =10,000$

Total Production Cost =60,000+10,000=$70,000

Selling price per tools =$8

Total SP =20,000×8=$1,60,000

Gross Profit = Total SP Total Production Cost =1,60,00070,000=$90,000

Gross Profit per tools =90,00020,000=$4.50

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