Can somebody help me figure out how to calculate the profit or loss on 12,000 bags and 25,000 bags in this problem?
The problem is Healthy Foods, Inc., sells 50-pounds of grapes to the military for $10 a bag. The fixed costs of this operation are $80,000, while the variable costs of the grapes are $.10 per pound.
I have read my chapter and it does not explain how to do this.
To calculate the profit or loss on a given quantity of bags, we need to determine the total revenue and the total cost associated with that quantity.
First, let's calculate the total revenue for each quantity of bags:
To find the revenue from selling the bags, we multiply the selling price per bag with the number of bags. The selling price per bag is $10.
For 12,000 bags:
Total revenue = Selling price per bag * Number of bags
Total revenue = $10 * 12,000
For 25,000 bags:
Total revenue = Selling price per bag * Number of bags
Total revenue = $10 * 25,000
Next, let's calculate the total cost for each quantity of bags:
The total cost consists of fixed costs and variable costs. Fixed costs do not change with the quantity of bags, while variable costs depend on the weight of the grapes in each bag.
Given that the fixed costs are $80,000, we do not need to make any adjustments for different quantities of bags.
For the variable costs, we need to calculate the cost per bag and then multiply it by the number of bags.
To find the variable cost per bag, we multiply the variable cost per pound by the weight of the grapes in each bag. The variable cost per pound is $0.10, and the weight per bag is 50 pounds.
For 12,000 bags:
Variable cost per bag = Variable cost per pound * Weight per bag
Variable cost per bag = $0.10 * 50
For 25,000 bags:
Variable cost per bag = Variable cost per pound * Weight per bag
Variable cost per bag = $0.10 * 50
Now, we can calculate the total cost for each quantity of bags:
For 12,000 bags:
Total cost = Fixed costs + Variable cost per bag * Number of bags
Total cost = $80,000 + (Variable cost per bag * 12,000)
For 25,000 bags:
Total cost = Fixed costs + Variable cost per bag * Number of bags
Total cost = $80,000 + (Variable cost per bag * 25,000)
Once you have the total revenue and total cost for each quantity of bags, you can calculate the profit or loss:
Profit/Loss = Total revenue - Total cost
By plugging in the values into the respective formulas, you should be able to calculate the profit or loss for both quantities.
To calculate the profit or loss on a certain number of bags, we need to consider the fixed costs, variable costs, and revenue. Let's go through the steps for calculating the profit or loss on 12,000 bags and 25,000 bags.
Step 1: Calculate the total variable costs:
First, determine the variable cost per bag. Since the grapes are sold in 50-pound bags and the variable cost is given as $0.10 per pound, the variable cost per bag would be 50 × $0.10 = $5.
Next, calculate the total variable costs for each quantity of bags:
For 12,000 bags: Total Variable Costs = Variable Cost per Bag × Number of Bags = $5 × 12,000 = $60,000
For 25,000 bags: Total Variable Costs = $5 × 25,000 = $125,000
Step 2: Calculate the total costs:
The total costs include both fixed costs (which remain constant) and variable costs. To calculate the total costs, add the fixed costs to the total variable costs:
For 12,000 bags: Total Costs = Fixed Costs + Total Variable Costs = $80,000 + $60,000 = $140,000
For 25,000 bags: Total Costs = $80,000 + $125,000 = $205,000
Step 3: Calculate the revenue:
The revenue is calculated by multiplying the price per bag by the number of bags sold:
For 12,000 bags: Revenue = Price per Bag × Number of Bags = $10 × 12,000 = $120,000
For 25,000 bags: Revenue = $10 × 25,000 = $250,000
Step 4: Calculate the profit or loss:
To determine the profit or loss, subtract the total costs from the revenue:
For 12,000 bags: Profit/Loss = Revenue - Total Costs = $120,000 - $140,000 = -$20,000 (a loss of $20,000)
For 25,000 bags: Profit/Loss = $250,000 - $205,000 = $45,000 (a profit of $45,000)
Therefore, Healthy Foods, Inc. would have a loss of $20,000 on 12,000 bags and a profit of $45,000 on 25,000 bags.