Question

American Chemical Company manufactures a chemical compound that is sold for $52 per gallon. A new variant of the chemical has been discovered, and if the basic compound were processed into the new variant, the selling price would be $73 per gallon. American expects the market for the new compound variant to be 8,600 gallons initially and determines that processing costs to refine the basic compound into the new variant would be $146,200. Required: a. What would be the effect on total profit if American produces the new compound variant

Answer 1

Answer:

Effect on income= $34,400 increase

Explanation:

Giving the following information:

Actual price= $52

New variant price= $73

Number of units= 8,600 gallons

Total cost= $146,200

To calculate the effect on income, we need to use the following formula:

Effect on income= increase in income - total cost

Effect on income= 8,600*(73 - 52) - 146,200

Effect on income= $34,400 increase