Nib Chocolet Company produces 100,000 chocolet bars which sell for 4 ETB a bar

Accounting Aug 24, 2020

Nib Chocolet Company produces 100,000 chocolet bars which sell for 4 ETB a bar. If variable costs are 3ETB per bar, and it has 150,000ETB fixed operating costs, in the short run, it should

Expert Solution

Given,

Number of Chocolate Bars Produced = 100,000

Sales price per Bar = 4 ETB

Variable Cost per Bar = 3 ETB

Fixed Operating Cost = 150,000 ETB

Profit = Sales - Variable Cost - Fixed Operating Cost

= (100,000*4 ETB) - (100,000*3 ETB) - 150,000 ETB

= 400,000 ETB - 300,000 ETB - 150,000 ETB

Profit = -50,000 ETB

As, there is loss of 50,000 ETB still it should keep producing as variable cost are being met.

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