Amanufacturing company leases a building for $100,000 per year for its production facilities. in addition the machinery used in this building is being paid for in installments of $20,000/year. each unit of production costs $15 in labor and $10 in materials. if 10,000 units per year are sold at $40 each , what is the annual profit? ( show as much work as possible)
(a) $280,000
(b) $50,000
(c) $150,000
(d)-$50,000
(e) $30,000

(E) $30,000

Explanation:

For computing the annual profit, the following formula is used.

Annual Profit = Total revenues - total cost

where,

Total revenue = Number of units × selling price per unit

                        = 10,000 units × $40

                        = $40,000

And, the total cost = lease cost + installment amount + variable cost

                              = $100,000 + $20,000 + ($10,000 units × $15 + $10,000 units × $10)

                              = $120,000 + $250,000

                              = $370,000

Now put these values to the above formula

So, the answer would be equal to

= $400,000 - $370,000

= $30,000

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