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Sunk Costs Save Question 7 (1 point) Stellar Company has the following sales, variable cost, and fixed cost. If sales increase by $10,000 then their profit increases/decreases by how much? Sales Variable Costs Fixed Costs Your Answer: $50,000 $8,100 $28,000
Expert Answer
Current profit=(Sales-Variable costs-Fixed costs)
=($50000-$8100-$28000)=$13900.
Hence if sales increases by $10000 ie an increase of =($10,000/50,000)=20%.;
Variable costs would also increase by 20% ie :
New sales=($50,000*1.2)=$60,000
Less:Variable costs($8100*1.2)=$9720
Less:Fixed costs=$28000
New profits=$22280.
Hence increase in profits=($22280-$13900)=$8380.
Fixed costs do not change with change in units sold .
