Question

Apple anticipates it will sell 100,000 units in the coming year. It is considering investing in a new machine that will increase its fixed costs by $7,500,000 per year and decrease its variable costs by $40 per unit. Compute net income if Apple does not purchase the machine.

Answer 1

Incomplete question. However, it would be inferred you want to know the requirements to calculate net income.

Explanation:

Remember, net income is total revenue minus total cost. Since Apple anticipates selling 100,000 units, if we assume the fixed cost to be $2,400 and the variable cost $34, and selling price unit is $150.

• Total cost= 2400+ (34*100,000)= 3,400,000
• Total Revenue= 150*100,000= $15,000,000
• Net income= 15,000,000-3,400,000= $11,600,000

The Net income is therefore $11,600,000.