Answer:
$2500
Explanation:
Given: Total output(quantity)= 1000 units.
average variable cost per unit= $3
Average fixed cost per unit= $1.5
Selling price per unit is $7
We know, Profit= [tex]Total\ revenue - Total\ cost[/tex]
First, lets find out total cost
Total cost= [tex]Total\ fixed\ cost+ Total\ variable\ cost[/tex]
Remember, cost= [tex]average\ cost\times quantity[/tex]
[tex]Fixed\ cost= \textrm{average fixed cost per unit}\times quantity[/tex]
[tex]Fixed\ cost= 1.5\times 1000= \$ 1500[/tex]
[tex]Variable\ cost= \textrm{average variable cost per unit}\times quantity[/tex]
[tex]Variable\ cost= \$ 3\times 1000= \$ 3000[/tex]
∴ Total cost= [tex] 1500+ 3000[/tex]= [tex]\$4500[/tex]
Now, finding total revenue.
[tex]Total\ revenue= selling\ price\times quantity[/tex]
[tex]Total\ revenue= \$ 7\times 1000= \$ 7000.[/tex]
Profit= [tex]Total\ revenue - Total\ cost[/tex]
∴ Total profit= [tex]\$ 7000-\$ 4500= \$2500[/tex]
Total profit= $2500
