Question

A specialist graphics company is investing in a new machine which enables it to make high-quality prints for its clients. Demand for these prints is forecast to be around 100,000 units in first year and 220,000 units in second year. The fixed cost of purchasing a machine is €200.000 and
maximum printing capacity of a machine 100.000 unit per year. The variable cost of printing is
€1 per unit. The company believes they will be able to charge €4 per unit for producing the prints.
What profit are they likely to make in the first and second years?

Answer 1

The profit that will be made for the first and second years will be $100,000 and $460,000.

How to calculate the profit?

The profit of the graphics company for the first year will be:

= 4(100000) - [200000 + 100000]

= 400000 - 300000

= 100000

The profit for the second year will be:

= 4(220000) - (200000 + 220000)

= 880000 - 420000

= 460000

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