Question

The total cost for Company X to produce a batch of tools is 10,000$plus$ $3$ per tool. Each tool sells for 8$.Thegrossprofitearnedfromproducingandsellingthesetoolsisthetotalincomefromsalesminusthetotalproductioncost.Ifabatchof$20,000$ tools is produced and sold, then Company X's gross profit per tool is :

• A. $\$3.00$
• B. $\$3.75$
• C. $\$4.50$
• D. $\$5.00$
• E. $\$5.50$

Answer 1

Answer: (C)

$\$4.50$

Total tools $=20,000$

Cost price per tools $=\$3$

$\therefore$ Total CP $=20,000\times 3=\$60,000$

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

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

Selling price per tools $=\$8$

$\therefore$ Total SP $=20,000\times 8=\$1,60,000$

$\therefore$ Gross Profit $=$ Total SP $-$ Total Production Cost $=1,60,000-70,000=\$90,000$

$\Rightarrow$ Gross Profit per tools $=\frac{90,000}{20,000}=\$4.50$